Question

6. The Trektronics store begins each month with 900 phasers in stock. This stock is depleted each month and reordered. The carrying cost per phaser is $31 per year and the fixed order cost is $535. What is the total carrying cost? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Carrying costs $ What is the restocking cost? (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 optimal 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

EOQ = √(2DO)/C

where; D = Demand

O = Order cost

C = Carrying Cost

a). Average inventory= Current Order quantity/2.

Total Carrying Costs = Carry Cost * Average Inventory

= $31 * (900/2) = $13,950

b). Restocking Cost(also called ordering cost) = number of orders * cost per order

number of orders = 52 times (the number of weeks in a year)

= 52 * $535 = $27,820

c). EOQ = [(2 x 12 x 900 x $535) / $31]^1/2 = 610.55, or 611

d). Number of orders = Annual demand/EOQ

= (12 x 900) / 610.55 = 17.69, or 18 orders