Question

The Boilermakers is a manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter," is used for the two most expensive models, and has an estimated annual demand of 540 units. The Boilermakers estimates the cost to place an order is $100, and the holding cost for each assembly is $10 per month. a) Currently, not knowing about EOQ, the purchasing manager places an order for the Smooth Shifter once a month, i.e., twelve times per year. What is the annual total inventory cost? [Rounded to 2 decimals] (Hint: you need to convert the 10 dollar monthly holding cost to yearly cost.) b) You are new hire and you realize that using the optimal order quantity Q* would reduce total inventory cost. Find the optimal order quantity Q" Rounded to whole number] When using this optimal order quantity, what is the order cycle (in months) between two orders and what is the annual inventory cost? [Rounded to 2 decimals] c) Suppose the supplier sells the product in boxes. Each box contains 4 assemblies. What is the optimal order quantity? What is the corresponding annual inventory cost?

Answer 1