Question

The Crandall store begins each week with 360 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $31 per year and the fixed order cost is $69.

What is the current total carrying cost? (Omit $ sign in your response.)

Carrying costs           $

What is the current restocking cost? (Omit $ sign in your response.)

Restocking costs           $

What is the economic order quantity? (Round the answer to the nearest whole number.)

EOQ            

How many orders per year will Crandall place under the new policy? (Do not round intermediate calculations. Round the answer to the nearest whole number.)

Orders per year             times

Should Crandall increase or decrease its order size?

• Increase

• Decrease

Answer 1

Calculation of the Current carrying cost :-

Current carrying cost = (Q/2) * Carrying cost per phaser = (360 / 2) * 31 = $ 5,580

Current restocking cost :-

Here Every week is reordered,so Number of oders in years = No of weeks in a year.

Number of orders in a year = 52 orders

Restocking Stock = Number of orders * Ordering cost per order = 52 * 69 = $ 3,588

Calculation of the EOQ :-

EOQ = (2AO/C)^1/2

A = Annual demand of phasers = 52 * 360 phasers = 18,720 phasers

O = ordering cost per order = $ 69

C = carrying cost per unit per year = $ 31

EOQ = (2 * 18,720 * 69 / 31)^1/2

EOQ = 288.68 phasers = 289 phasers

Number of order if EOQ followed

Number of orders = Annual demand / EOQ = 18720 / 289 = 64.775 orders = 65 orders

It decrease the order size