Question

1. A hardware store sells paint that has a demand of 10,568 gallons per year. The store purchases the paint from a supplier for 15.0 dollars per gallon The unit holding cost per year is 19 percent of the unit purchase cost. while the ordering cost is 134 dollars per order. The paint supplier has a lead time of 8 days. What is the annual holding cost if the store uses the order quantity of 1,147 gallons per order? Assume EOQ model is appropriate.Use at least 4 decimal places.

2. A hardware store sells paint that has a demand of 11,209 gallons per year.The store purchases the paint from a supplier for 16 dollars per gallon. The unit holding cost per year is 11.5 dollars per gallon.while the ordering cost is 137 dollars per order.The paint supplier has a lead time of 7 days.What is the annual holding cost if the store wants to maintain an average inventory of 1,081 gallons? Assume EOQ model is appropriate.Use at least 4 decimal places.

Answer 1

1)

Annual demand per year: (A) - 10568 per year

Ordering cost :- (O) $ 134

Carrying cost (C) :- 19% of purchase cost ie 15 = $2.85

EOQ = 2AO /C whole root Annual

= (2 × 10568 × 134)/ 2.85 whole root

= 997 gallons

Annual holding cost = 1/2 × order quantity × C

= 1/2 × 1147 × 2.85

= 1634.475

2)

Annual demand (A ) :- 11209 gallons

Ordering cost (O) :- 137

Carrying cosy (C) :- 11.5

EOQ = 2AO/C whole root

=( 2 × 11209 × 137 )/ 11.5 whole root

= 516.7848 ie 517 gallons

Annual holding cost = 1/2 × order quantity × C

=( 1081 /2 )× 11.5

= 6215.75