Question

EOQ Thomas Corporation produces heating units. The following values apply for a part used in their production (purchased from external suppliers): D 7,605 Q- 195 P $ 33 C 3.30 Required: 1. For Thomas, calculate the ordering cost, the carrying cost, and the total cost associated with an order size of 195 units. If required, round your answers to the nearest cent. Ordering cost Carrying cost Total cost 2. Calculate the EOQ and its associated ordering cost, carrying cost, and total cost. If required, round your answers to the nearest cent. EOQ Ordering cost Carrying cost Total cost nits 3. What if Thomas enters into an exclusive supplier agreement with one supplier who will supply all of the demands with smaller, more frequent orders? Under this arrangement, the ordering cost is reduced to $ 0.33 per order Calculate the new EOQ. (Round your answer to one decimal place.) units

Answer 1

Answer:

1.

Ordering Cost $ ( 7605/ 195 x 33)	$ 1,287
Carrying Cost $ ( 195/ 2 x 3.30)	$ 321.75
Total Cost	$ 1608.75

2.

EOQ	390 units
Ordering Costs $ ( 7605/ 390 x 33)	$ 643.5
Carrying Costs $ ( 390/ 2 x 3.30)	$ 643.5
Total Cost	$ 1287

3. New EOQ = $ [ ( 2 x 7605 x 0.33) / 3.30]^1/2 = 39 units