Question

Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15 comma 000 units. Southeastern estimates its annual holding cost for this item to be ​$25.00 per unit. The cost to place and process an order from the supplier is ​$75.00. The company operates 300 days per​ year, and the lead time to receive an order from the supplier is 2 working days. ​a) What is the economic order​ quantity? nothing units ​(round your response to the nearest whole​ number). ​b) What are the annual holding​ costs? ​$ nothing ​(round your response to the nearest whole​ number). ​c) What are the annual ordering​ costs? ​$ nothing ​(round your response to the nearest whole​ number). ​d) What is the reorder​ point? nothing units ​(round your response to the nearest whole​ number).

Answer 1

Answer:

EOQ= 300 units

Annual ordering cost= $3750

Annual holding cost =$3750

Re-order point =100 units

Explanation:

The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost.

It is computed using he formulae below

EOQ = √ (2× Co× D)/Ch

EOQ = √ (2× 75× 15,000)/25

EOQ = 300 units

Annual holding cost

= EOQ/2 × holding cost per unit

= 300/2 ×  $25

=$3750

Annual ordering cost

= Annul demand/EOQ × ordering cost per order

=( 15,000/300)× $75

= $3750

Re-order Point

Maximum consumption × maximum lead time

=( 15,000/300)× 2 = 100 units