SunCar distributes parts for American cars in Belgium. Batteries are a commonly requested item. The lead...
SunCar distributes parts for American cars in Belgium. Batteries are a commonly requested item. The lead time to obtain car batteries is two months and the average demand is 100 per month. Lead time demand is normally distributed with a standard deviation of 10 units. Order cost is $75 and holding cost is $10 per year per battery.
The number of orders per year is closest to:
| A. | 67 |
| B. | 5 |
| C. | 30 |
Homework Answers
Average monthly demand = 100 units
Annual demand(D) = monthly demand X 12 months = 100 X 12 = 1200 units
Ordering cost(S) = $75
Holding cost(H) = $10
Economic order quantity(EOQ) = Sqrt of (2DS / H)
= Sqrt of [( 2 X 1200 X 75)/10]
= Sqrt of (180000/10)
= Sqrt of 18000
= 134.16 or rounded to 134 units
Number of orders per year = D/EOQ = 1200/134 = 8.96 or rounded to 9
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