Best Bikes produces bicycles and buys brakes from a supplier in Japan. The brake set for...
Best Bikes produces bicycles and buys brakes from a supplier in Japan. The brake set for one bicycle costs $125, and it is $35 to process the order with the supplier. The company consistently sells 50 bicycles a week (for 52 weeks of the year) and holds an average of 1 week of brake sets in inventory to cover the constant lead time from Japan. The company uses a holding/carrying rate of 25%.
1. What is the average inventory carrying/holding cost for the brakes?
2. What is the EOQ for the brakes?
3. What is the ROP for the brakes?
4. What is the total annual inventory cost for the brakes?
Homework Answers
Economic Order Quantity is the quantity which is used to lower
the total inventory cost. When the company orders at EOQ then it
enjoys the lower annual cost.
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Best Bikes produces bicycles and buys brakes from a supplier in
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