Graph of annual cost for holding-ordering and holding

Reference no: EM13335887

A local tire distributor expects to sell 9,600 steel-belted tires of a certain size and tread design next year. Assume that EOQ model assumptions are valid. Each tire costs $50, ordering cost is $80 per order and annual carrying cost per unit is estimated to be 30% of purchasing cost. (Use 1 year = 360 days)

(a) What is the annual inventory cost if you order 600 units at a time?

(b) Draw the graph of annual cost for holding, ordering and holding + ordering (for lot size between 80 and 640 in the increment of 80).

(c) Determine the “optimal” lot size if your order lot size must be a multiple of 60. For this answer, what is your order policy, that is, (when to order, how much to order); if a delivery lead-time is 20 days? When you are placing an order, how much on hand inventory would you have?

(d) What is the EOQ quantity? Provide a lot size Q* by rounding off within ±5%.

Reference no: EM13335887

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