Question

QUESTION 6 (18 MARKS) a. Give TWO (2) fundamental decisions that you have to make when controling inventory. (2 marks) b. The Ross White's machine shop uses 2,500 brackets during the course af a year, and this usage is relatively constant throughout the year. These brackats are purchased from a suppier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost) and the ardering oost parodors $1 875. There are 250 working days per year. Find EOa. (2 marks) i Given the EOQ, what is the average inventory? What is the annual inventory holding cost? 4 marks) ECSON MAKING İN BUSINESS MATRC NO n minimizing cost, how many orders would be the annual ondering cosr? made each year? What would 4 mark Given the EOO, what is the total annual inventory cost (including purchase co (2 mar What is the time between orders? (2 ma Find ROP (2 m

Answer 1

EO0- SQRT(2*Annual Requirement Ordering Cost) Carrying Cost EOO- SQRT(2*2500*18.75) 1.5 250 b)2 Average Inventory EOQ 2 250 125 Annual Inventory Holding Cost 125*1.5 187.5 c) No. of Order Made Each Year 2500 250 10 Annual Ordering Cost 18.75x10 187.5 D)Total Annual Inventory Cost Annual inventory holding cost+ annual ordering cost + purchase cost 187.5+187.5+(2500*15) 37875 365 10 E) Time between Tow Orders 36.5-2 34.5 36.5 f)RO P 2 365 X 365 13.69863 14