Minimize total annual ordering and holding cost

Assignment Help Operation Management

Reference no: EM132231183

1. A service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an annual basis. Determine: (10 points)

a. The economic order quantity

b. The total cost of carrying the cloths (excluding purchase price)

c. The average inventory d. How many times to order per year?

e. The time between two orders, if the business days is 240 days in a year

2. A large law firm uses an average of 10 packages of copier paper a day. Each package contains 500 sheets. The firm operates 260 days a year. Holding cost for the paper is $1 per year per package, and ordering cost is $10 per order. (10 points) Hint: As the holding cost is annual, you need to convert the daily demand to annual demand

a) What order quantity would minimize total annual ordering and holding cost? (Round the final answer to the nearest whole number.)

b) Calculate the total annual inventory control cost using your order quantity from part a. (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

c) Except for rounding, are annual ordering and holding costs equal at the EOQ?

d) The office manager is currently using an order quantity of 100 packages.

The partners of the firm expect the office to be managed in a cost-efficient manner. Would you recommend that the office manager use the optimal order quantity instead of 100 packages? Hint: convert the daily demand to annual demand

e) If lead time is 3 days, calculate the Re-order point

Reference no: EM132231183

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