What is the annual demand of engines

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The manager of a Cummings engine manufacturing facility has collected some historical data on the monthly demand of hemi-diesel engines (See table 1) Table 1 Period Monthly Demand January 250 February 478 March 900 April 405 May 500 June 859 July 560 August 350 September 700 October 900 November 200 December 100 The unit cost of an engine is $3,500 and there is a 20% interest rate associated with the holding cost. It takes 6 weeks for a replenishment order to be placed. Every time the facility has to setup to make these engines the manager estimates a setup cost of around $450,000. The annual cost of backorders is $12,000,000 and the manager is worried about this figure. Demand seems to be normally distributed and the manager would like to determine the following: What is the annual demand of engines? What is the economic order quantity? What is the average demand of engines over the six week period for replenishment?

Reference no: EM132257196

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