Calculate annual product costs for each alternative

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Reference no: EM131750364

Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:

Average demand = 22 units per day

Average lead time = 38 days

Item unit cost = $58 for orders of less than 280 units

Item unit cost = $56 for orders of 280 units or more

Ordering cost = $33

Inventory carrying cost = 25%

The business year is 250 days

Assume there is no uncertainty at all about the demand or the lead time.

1) Calculate EOQ if unit cost is $58 and $56. (Note: These EOQs do not need to be feasible in their price range.)

Item unit cost = $58

Item unit cost = $56

2) Calculate annual ordering costs for each alternative?

Item unit cost = $58

Item unit cost = $56

3) Calculate annual inventory carrying costs for each alternative?

Item unit cost = $58

Item unit cost = $56

4) Calculate annual product costs for each alternative?

Item unit cost = $58

Item unit cost = $56

5) What will be the total costs for each alternative?

Item unit cost = $58

Item unit cost = $56

6) Based on your analysis, how many chairs should they order at a time?

7) How much the firm can save annually by using the order quantity in Part f. instead of the first EOQ shown in Part a?

Reference no: EM131750364

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