Reference no: EM132183951
Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:
Average demand = 29 units per day
Average lead time = 36 days
Item unit cost = $56 for orders of less than 260 units
Item unit cost = $54 for orders of 260 units or more
Ordering cost = $31
Inventory carrying cost = 25%
The business year is 250 days
Assume there is no uncertainty at all about the demand or the lead time.
a. Calculate EOQ if unit cost is $56 and $54. (Note: These EOQs do not need to be feasible in their price range.) (Round up your answers to the next whole number.)
Unit cost at$56____Units
Unit cost at$54____Units
b. Calculate annual ordering costs for each alternative? (Round your answers to 2 decimal places.)
Unit cost at$56____
Unit cost at$54____
c. Calculate annual inventory carrying costs for each alternative? (Round your answers to 2 decimal places.)
Unit cost at$56____
Unit cost at$54____
d. Calculate annual product costs for each alternative?
Unit cost at$56____
Unit cost at$54____
e. What will be the total costs for each alternative? (Round your answers to 2 decimal places.)
Unit cost at$56____
Unit cost at$54____
f. Based on your analysis, how many chairs should they order at a time? (Round your answers to 2 decimal places.)
Order Quantity____Chairs
g. How much the firm can save annually by using the order quantity in Part f. instead of the first EOQ shown in Part a? (Round your answer to 2 decimal places.)
Amount saved_____