Question

The Sofaworld Company purchases upholstery material from Barrett Textiles. The company uses 44,000 yards of material per year to make sofas. The cost of ordering material from the textile company is $1,200 per order. It costs Sofaworld $0.70 annually to hold a yard of material in inventory. Determine the optimal number of yards of material Sofaworld should order, the minimum total inventory cost, the optimal number of orders per year, and the optimal time between orders. (Round all answers to 2 decimal places, e.g. 52.75. Use 365 days for calculation.)

Answer 1

Answers are in BOLD

	Days per year=		365
	Annual demand, D=		44000
	Order cost or setup cost, S		$1,200.00
	holding cost per year, H=		$0.70
Answer a	Optimal Order quantity, Q=	squareroot(2*S*D/H)	12282
Answer c	#orders per year =	D/Q	3.58
Answer b	annual minimum total inventory cost=	Q*H/2	$4,298.84
Answer d	optimal time between orders, order cycle=	days per year/orders per year	101.89