Question

answer all parts

Clap Off Manufacturing uses 2,600 switch assemblies per week and then reorders another 2,600. Assume the relevant carrying cost per switch assembly is $6.30 and the fixed order cost is $555.

Calculate the carrying costs. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Carrying costs ____ $?

Calculate the restocking costs. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Restocking costs ____ $ ?

Calculate the economic order quantity. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Economic order quantity    ____?

Calculate the EOQ number of orders per year. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Number of orders per year ____?

Answer 1

(a) Order Quantity Q = 2600

Ordering Cost = C_o = $555

Holding Cost = C_c = $6.30/year

Carrying Cost = average inventory * unit carrying cost = (Q/2)*C_c = (2600/2)*6.30 =$8190

(b) Assuming number of weeks in an year = 52 weeks

Annual Demand = 2600*52 = 135200

Restocking cost = Number of orders * cost/order = (D/Q) C_o = (135200/2600)*555 = $28860

(c) Annual Demand = D = 2600*52 = 135200/year

Ordering Cost = C_o = $555

Holding Cost = C_c = $6.30/year

Economic Order Quantity Q* = √(2DC_o/C_c) = √(2*135200*555/6.30) = 4880.67

(d) Number of Orders Per Year = Annual Demand / Economic order quantity = 135200/4880.67 = 27.70