Question

Clap Off Manufacturing uses 1,800 switch assemblies per week and then reorders another 1,800. Assume the relevant carrying cost per switch assembly is $5.50 and the fixed order cost is $600. 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

1) Carrying costs = Carrying cost per switch x Average inventory = $5.50 x 1800/2 = $4950.00

2) The orders are made every week -

Restocking costs = Order cost per order x No. of weeks = $600 per week x 52 weeks = $31200.00

3)

where, EOQ = Economic order quantity, A = annual demand, O = cost per order, C = Carrying cost per unit

A = 1800 switch assemblies per week x 52 weeks = 93600

O = $600, C = $5.50

4) No. of order per year = Annual Demand / EOQ = 93600 / 4519.05 = 20.71