Determine the economic order quantity

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Reference no: EM133297515

Case: Sparks Limited imports contact lenses from China for sale in a Southern African country. During the 2021 financial year, the company adhered to the policy of importing 6 000 pairs of contact lenses every month. The actual monthly sales of contact lenses by Sparks Limited during the 2021 financial year is depicted in Table 2.1 below. The company paid R5 000 to place an order for the contact lenses and a carrying cost of R2.00 for each pair of contact lenses during 2021.

Question 1 Using the actual sales data provided above, determine the economic order quantity (EOQ) of contact lenses for 2021 financial year.

Question 2 Using the EOQ model, determine the number of orders for contact lenses placed by Sparks Limited during 2021.

Question 3 Suppose that the contact lenses arrive at the premises of Sparks Limited 7 days after an order has been placed, determine the level at which Sparks Limited had to replenish the stock during 2021 (Assume a 350 working days during 2021).

Question 4 Determine how much Sparks Limited would save by switching from the current ordering policy to the economic order quantity model.

Question 5 Calculate the three-month-weighted-moving-average monthly forecasts for the period April 2021 - December 2021. Use weights of 0.5, and 0.2 for the most recent and oldest monthly data respectively and 0.3 for the middle month

Question 6 Determine the Mean Absolute Deviation (MAD) of the three-month-weighted-moving-average monthly forecasts for the April - December 2021 period:

Question 6.1 The linear regression equation of the sales of contact lenses for the 2021 financial year is given by the expression: y = 201.4x + 4091 (where 'y' denotes monthly sales, and 'x', the number representing the month. For example, x = 1, 2, 3, etc., if the month is January, February, March, etc.). Use the regression equation to determine the Mean Absolute Deviation (MAD) of the regression forecasts for the April - December 2021 period.

Question 6.2 Which of the two methods is better at forecasting the sales of the contact lenses?

Reference no: EM133297515

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