Calculate annual product costs for each alternative

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Reference no: EM132219343

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

Average demand = 36 units per day

Average lead time = 50 days

Item unit cost = $70 for orders of less than 400 units

Item unit cost = $68 for orders of 400 units or more

Ordering cost = $45

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 $70 and $68. (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 $70 __________units.

Unit cost at $68__________units.

b. Calculate annual ordering costs for each alternative? (Round your answers to 2 decimal places.)

Unit cost at $70 ________ units.

Unit cost at $68 ________ units.

c. Calculate annual inventory carrying costs for each alternative? (Round your answers to 2 decimal places.)

Unit cost at $70 __________ units.

Unit cost at $68 __________ units.

d. Calculate annual product costs for each alternative?

unit cost at $70 __________ units.

unit cost at $68 ___________ units.

e. What will be the total costs for each alternative? (Round your answers to 2 decimal places.)

unit cost at $70 _________ units.

unit cost at $68 _________ units.

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 __________ ?

Reference no: EM132219343

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