Reference no: EM132948498

Question 1

Leonard Manufacturing is a manufacturer of a special bearings. Leonard can sell 10,000 units of his bearings annually. Production averages 80 units per day, while demand is 60 units per day. Holding costs are $5.00 per unit per year, and setup cost is $200.00.

(a) If the firm wishes to produce this product in economic batches, what size batch should be used?

(b) What is the maximum inventory level?

(c) How many order cycles are there per year?

(d) What are the total annual setup and holding costs?

Question 2

Good Kitchen sells a popular blender with the demand of 175/month. Good Kitchen purchase the blenders from its supplier at the unit cost of $2.50 and the cost of placing an order has been estimated to be $12.00. Good Kitchen uses an inventory carrying charge of I = 27% per year.

Determine (a) the optimal order quantity, (b) the order frequency, and (c) the annual holding and setup cost. If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be (d) the new economic order quantity, (e) the order frequency, and (f) annual holding and setup costs? Explain these results.