Question

Staples sells 500 HP printers every week (assume 52 weeks per year). Each printer costs $100 and Staples has a holding cost of 20 percent. The fixed cost for each order Staples places with HP is $800. Find the EOQ, total annual cost, reorder point, number of orders per year, and the time between orders.

Answer 1

Answer:

In this question,

A (Annual requirement ) = 500

O (ordering cost) = $ 800

C (carrying cost) = 100*20% = $ 20

1. EOQ =

EOQ =

EOQ = 200 units

2. Total annual cost =

=

Total annual cost = $ 4,000

3. In the EOQ, it is assumed that there is no time difference between ordering and procurement of materials. Further, o information is givrn in quetion regarding lead period. Thus, The reorder point is the level of inventory when the inventory level drops to zero as inventory is instantly delivered by suppliers.

Reorder level = 0

4. Number of orders = Annual requirement / EOQ

= 500 / 200

= 2.5 orders

5. Time between orders = 52 weeks / 2.5 orders

= 20.8 weeks

In case of any doubt, please comment.