Question

1. The Ziggys Bicycle Shop operates 364 days a year, closing only on Christmas Day. The shop pays $400 for a particular bicycle purchased from the manufacturer. The annual holding cost per bicycle is estimated to be 20% of the dollar value of inventory. The shop sells an average of 20 bikes per week. The cost for each order is $225.

• Determine the optimal order quantity, optimal number of orders, order cycle time, and the total minimum cost.
• Determine reorder point if the lead time to receive every order is 6 days.

Answer 1

Order Quantity Data
Annual Demand Rate, D	140
Setup/Ordering Cost, S	225
Holding/Carrying Cost per Unit per Year, H	₹                        80.00
Unit price, P
Reorder Point Data (optional)
Days per year or ...	364
...Daily demand rate, d	0.384615385
Lead time in days, L	6
Safety stock, ss	0.2
Reorder Point, dL+ss	3
Results
Optimum Order Quantity, Q* (EOQ)	28.06
Maximum Inventory, Q*	28.26
Average Inventory, Q*/2	14.03
Number of Orders, D/Q*	4.99
Annual Holding Cost, HQ*/2	$1,122.50
Annual Order Cost, DS/Q*	$1,122.50
Annual Unit Costs, PD	$0.00
Total Annual Cost, Tc	$2,244.99