Calculate economic order quantity and time btwn production

Reference no: EM13204174

A company has an annual requirement for 150,000 parts, which cost $125 each. The parts require processing having a $4,000 setup cost. Each part occupies 0.5 sqft of floor space in the factory. Floor space has a total cost of $12.50 per square foot. The company uses 20% MARR (Minimal accepted rate of return).

a) Calculate the economic order quantity and the time between production (setup) runs.

b) Plot the inventory level vs time for a reasonable number of full inventory cycles.

c) If the company decides to meet its annual volume requirement of 150,000 by placing an order every 2 months, what would be the impact on the combined setup and storage costs?

Reference no: EM13204174

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