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Question - Docklands Furniture Factory produces products made of wood to local retail shops in Melbourne. An annual requirement for wood is 200,000 tonnes. The price of wood fluctuates and the average estimated price for 2017 is $5000 per tonne. It costs $0.25 to store one tonne for a year. It costs $200 to place and receive one order. The company is closed for two weeks during annual holidays. Required: 1. Calculate the company's EOQ? 2. Compute the total annual: (a) number of orders, (b) ordering costs and (c) carrying costs. 3. Assume the lead time for an order is two week. Demand constantly fluctuates and the maximum weekly demand is 4,100 tonnes. Calculate the inventory reorder point in tonnes.
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