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A larger distributor of workbooks based on an annual holding cost rate of 20%. The demand...

A larger distributor of workbooks based on an annual holding cost rate of 20%. The demand is 7,000 per month, with an order cost of $40.00 per order, the cost of the item is $9.50.

  1. Calculate the EOQ

  2. Calculate the reorder point with the lead time is 4 days, and the distributor works 300 days a year.

  3. How many times per year the distributor will order the workbooks?

  4. What is the total order cost?

  5. What is the total holding cost?

  6. What is the total cost of order and holding?

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Homework Answers

Answer #1

Answer : EOQ=

Annual demand =7000*12=84000

Order cost =$40

Annual holding cost= $9.50*(0.20) =$1.9

EOQ= =964.75 units/ 965 units

2. Reorder point= Average daily demand * Lead time

Average daily demand= Demand/ No of days =84000/300=280 units

Reorder point = 280*4= 1120

3.Number of order= Annual demand/ EOQ= 84000/965=

87 orders

4.Total order cost =(Demand /EOQ) * price of placing an order

Total order cost= 87*$40= $3480

5. Holding cost= (Number of units in each order/2)*holding cost=(965/2)*$1.9=$916.75

6.Total cost of order and holding= $3480+$916.75= $4396.75

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