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Eastside Auto purchases a component used in the manufacturing of automobile generators directly from the supplier. Eastside's generator production operation, which is operated at a constant rate, will require 1,000 components per month throughout the year (12,000 units annually). Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and annual holding costs are 20% of the value of the inventory. Eastside has 250 working days per year and a lead time of 10 days.
a. What is the EOQ for this component?
b. What is the cycle time?
c. What is the reorder point?
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Assume the process has not shifted from the center of the specification.
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