Practical Management Science
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:

Average demand = 36 units per day

Average lead time = 50 days

Item unit cost = $70 for orders of less than 400 units

Item unit cost = $68 for orders of 400 units or more

Ordering cost = $45

Inventory carrying cost = 25%

The business year is 250 days

Assume there is no uncertainty at all about the demand or the lead time.

 

  1. Calculate EOQ if unit cost is $70 and $68. (Note: These EOQs do not need to be feasible in theirprice range.) (Round up your answers to the next whole number.)

 

 

EOQ

Unit cost at $70

 

units

Unit cost at $68

 

units

 

  1. Calculate annual ordering costs for each alternative? (For the first value, use your rounded EOQ from Part a. For the second value, use the lowest feasible order quantity needed to qualify for that price level. Round your answers to 2 decimal places.)

 

 

Annual Ordering Cost

Unit cost at $70

 

Unit cost at $68

 


 

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