Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Economic Order Quantity
A pipe manufacturer requires a chemical for making plastic at the rate of 6000
gallons per year. The cost of keeping the chemical storage is $10 per gallon per
year. Ordering costs are $200 per order. The chemical is bought at $45 per
gallon.
What is the EOQ and the Annual Total Cost?
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- Briefly explain the costs associated with EOQ model. If production cost goes up, what is the impact on the EOQ quantity?arrow_forwardA produce distributor uses 790 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 39 percent of the purchase price per crate. Ordering costs are $31. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying costs by using the EOQ? (Round intermediate calculations and final answer to 2 decimal places.) Savings per yeararrow_forward03) Halifax Souvenir Company currently orders 500 units four times each year. Each order costs $12 and each unit costs $1.20 per year to carry. On average, it takes 5 days to receive an order from the supplier. The company operates 250 days per year. Required: 1. What is the EOQ? 2. Calculate total annual inventory cost under EOQ. 3. What is the current inventory cost? 4. What is the re-order point?arrow_forward
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is $30. The cost of holding one unit of inventory for one year is $15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Compute the economic order quantity. Economic order quantity = 1600 Compute the ordering, carrying, and total costs for the EOQ. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?arrow_forwardThe electrolyte drink for our beloved NMSU soccer team average normally distributed demand of 5 units and a standard deviation of 1 unit. Lead time for replenishment is fixed at four days. (a) What is the reorder point if there is no safety stock? (b) What is the reorder point if the service level is 80 percent? (c) How much more safety stock is required if the service level is raised from 80 percent to 90 percent?arrow_forwardUsing relevant eoq calculations Which order size would you recommend that the hospital use?arrow_forward
- K William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D 19,400 units/year Ordering cost S $27/order Holding cost H $5/unit/year a) The EOQ for the workbooks is 458 (round your response to the nearest whole number) b) What are the annual holding costs for the workbooks? $ (round your response to the nearest whole number).arrow_forward← William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D 19,400 units/year Ordering cost S $27/order Holding cost H $5/unit/year a) The EOQ for the workbooks is 458 (round your response to the nearest whole number). b) What are the annual holding costs for the workbooks? $ 1145 (round your response to the nearest whole number). c) What are the annual ordering costs? $ (round your response to the nearest whole number).arrow_forwardNeed some help with part D please!arrow_forward
- XYZ Pharmaceuticals sells COVID testing kits. Calculate the Economic Order Quantity, or EOQ, if annual demand is 20,000 testing kits, inventory storage costs average 20 percent, the unit price per kit is $50, and ordering costs are $25.arrow_forwardIf annual sales in are 65,000 units, price per unit is $25, carrying costs are 30%, and fixed costs per order is $100, then EOQ is 1,316.56. True or False?arrow_forwardBased on available information, lead time demandfor PC jump drives averages 50 units (normally distributed),with a standard deviation of 5 drives. Management wants a97% service level.a) What value of Z should be applied?b) How many drives should be carried as safety stock?c) What is the appropriate reorder point?arrow_forward
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