M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $1 per unit per year, and the ordering (setup) cost is $20 per order. The company operates 250 days per year. To minimize cost, how many units should be ordered each time an order is placed? How many orders per year are needed with the optimal policy? How many days in between orders What is the average inventory if costs are minimized? Suppose that the ordering (setup) cost is not $20, and Cotteleer has been ordering 150 units each time an order is placed. For this order policy (of Q = 150) to be optimal, determine what the ordering (setup) cost would have to be. $

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TomShelby TomShelby · Answer 1 · 2019-12-05T04:35:43+01:00

Answer:

EOQ 100

2.5 order per day

every 146 days

For EOQ of 150 then ordering cost should be of 45 dollar

Explanation:

Economic order quantity:

[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]

Where:

D = annual demand = 250

S= setup cost = ordering cost = 20

H= Holding Cost = 1.00

[tex]Q_{opt} = \sqrt{\frac{2(250)(20)}{1}}[/tex]

EOQ = 100

order per year: 250 / 100 = 2.5 order per year

days between orders:

365 / 2.5 = 146 days

part B:

To make 150 units the EOQ the optimal order quantity

then ordering cost should be:

[tex]150 = \sqrt{\frac{2(250)(S)}{1}}[/tex]

[tex]150^2 = 500(S)}[/tex]

[tex]22,500 / 500 = S}[/tex]

S = $45