Discount-Mart, a major East Coast retailer, wants to determine the economic order quantity for its halogen lamps. It currently buys all halogen lamps from Specialty Lighting Manufacturers, in Atlanta. Annual demand is 2 comma 000 lamps, ordering cost per order is $0.50, carrying cost per lamp is $20. As part of its new JIT program, Discount-Mart has signed a long-term contract with Specialty Lighting and will place orders electronically for its halogen lamps. a) What is the economic order quantity? nothing units per order (round your response to the nearest whole number). b) How many orders will be placed? nothing per year (round your response to the nearest whole number). c) What is the total annual cost of managing the inventory with this policy? $ nothing (round your response to the nearest whole number).
1.
EOQ = SQRT(2 * D * S / H)
EOQ = SQRT(2 * 2000 * 0.5 / 20)
EOQ = 10
2.
ORDER PER YEAR = DEMAND / EOQ = 2000 / 10 = 200
3.
TOTAL COST OF MANAGING THE INVENTORY = ANNUAL HOLDING COST + ANNUAL ORDERING COST
ANNUAL HOLDING COST = (EOQ / 2) * HOLDING COST = (10 / 2) * 20 =
100
ANNUAL ORDERING COST = ORDER PER YEAR * ORDERING COST = 200 * 0.5 =
100
TOTAL COST OF MANAGING = 100 + 100 = 200
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Discount-Mart, a major East Coast retailer, wants to determine the economic order quantity for its halogen...
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