An automotive manufacturer supplies bearings to the General Motor Co. The supply chain and inventory management...
An automotive manufacturer supplies bearings to the General Motor Co. The supply chain and inventory management team use the economic order quantity model to replenish their raw material. They use 25,000 cases of materials per year and order 500 cases at a time. The cost to hold a case in inventory is $12/yr. How much does it cost them to place an order with their supplier?
Homework Answers
EOQ = SQRT(2 * DEMAND * ORDER COST / HOLDING COST)
ORDER COST = EOQ2 * HOLDING COST / 2 * DEMAND
ORDER COST = (500)2 * 12 / 2 * 25000 = $60
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