Question

Joe Henry's machine shop uses 2,450 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: Annual demand Holding cost per bracket per year Order cost per order Lead time Working days per year 2,450 $1.35 $18.00 2 days 250 a) What is the EOQ? 255.60 units (round your response to two decimal places). b)What is the average inventory if the EOQ is used? 127.80 units (round your response to two decimal places). What would be the annual inventory holding cost? $ 172.53 (round your response to two decimal places). Given the EOQ, how many orders will be made annually? 9.59 orders (round your response to two decimal places). What would be the annual order cost? $ 172.54 (round your response to two decimal places). (round your response d)Given the EOQ, what is the total annual cost of managing (ordering and holding) the inventory? $ to two decimal places).

Answer 1

d) Total Annual cost of inventory = Total Ordering cost + Total Holding cost

Total Ordering cost = Number of orders * Ordering cost per order

= (2450/255.6)*18

= $172.54

Total holding cost = Average Inventory * Holding cost per unit

= (255.6/2)*1.35

= $172.53

Total cost = $172.54 + $172.53

= $345.07