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OI 4. purcha a componer used in the manu be generator directly from the supplier. Westside's generator production operation, which is operated at a constant rate, will require 1000 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 com- ponent, and annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions: a. What is the EOQ for this component? b. What is the reorder point? C. What is the cycle time? d. What are the total annual holding and ordering costs associated with your recom- mended EOQ? 5. Suppose that Westside's management in Problem 4 likes the operational efficiency of or- dering once each month and in quantities of 1000 units. How much more expensive would this policy be than your EOQ recommendation? Would you recommend in favor of the 1000-unit order quantity? Explain. What would the reorder point be if the 1000-unit quan- tity were acceptable?

OI 4. purcha a componer used in the manu be generator directly from the supplier. Westside's generator production operation, which is operated at a constant rate, will require 1000 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 com- ponent, and annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions: a. What is the EOQ for this component? b. What is the reorder point? C. What is the cycle time? d. What are the total annual holding and ordering costs associated with your recom- mended EOQ? 5. Suppose that Westside's management in Problem 4 likes the operational efficiency of or- dering once each month and in quantities of 1000 units. How much more expensive would this policy be than your EOQ recommendation? Would you recommend in favor of the 1000-unit order quantity? Explain. What would the reorder point be if the 1000-unit quan- tity were acceptable?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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4. Westside Auto purchases a component used in the manufacture of automobile generators directly from the supplier. Westside's generator production operation, which is operated at a constant rate, will require 1000 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 com- ponent, and annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions: a. What is the EOQ for this component? b. What is the reorder point? C. What is the cycle time? d. What are the total annual holding and ordering costs associated with your recom- mended EOQ? 5. Suppose that Westside's management in Problem 4 likes the operational efficiency of or- dering once each month and in quantities of 1000 units. How much more expensive would this policy be than your EOQ recommendation? Would you recommend in favor of the 1000-unit order quantity? Explain. What would the reorder point be if the 1000-unit quan- tity were acceptable?
Transcribed Image Text:4. Westside Auto purchases a component used in the manufacture of automobile generators directly from the supplier. Westside's generator production operation, which is operated at a constant rate, will require 1000 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 com- ponent, and annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions: a. What is the EOQ for this component? b. What is the reorder point? C. What is the cycle time? d. What are the total annual holding and ordering costs associated with your recom- mended EOQ? 5. Suppose that Westside's management in Problem 4 likes the operational efficiency of or- dering once each month and in quantities of 1000 units. How much more expensive would this policy be than your EOQ recommendation? Would you recommend in favor of the 1000-unit order quantity? Explain. What would the reorder point be if the 1000-unit quan- tity were acceptable?
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