Question

The heat sinks needed are bought for $14 each and are ordered in quantities of 1200 units. Annual demand is 6200 heat sinks, the annual inventory holding cost rate is $2 per unit, and the cost to place an order is estimated to be $60. Calculate the following: (18 points-3 points each) 12) Economic order quantity (EOQ)= 13) Average inventory level= 14) The number of orders placed per year= 15) The total annual inventory holding cost= 16) The total annual ordering cost= 17) The total annual cost=

Answer 1

Answer:

EOQ 610

orders throughout the year 10.16

holding cost   $    610

ordering cost $   636,6‬

Explanation:

$Q_{opt} = \sqrt{\frac{2DS}{H}}$

D = annual demand = 6,200

S= setup cost = ordering cost = 60

H= Holding Cost = 2.00

Economic Order Quantity = 609.9180273

Order placed throughout the year:

demand / EOQ

6,200 / 610 = 10.16

Average Inventory (EOQ / 2) x holding cost

610 / 2 x $2   = $  610

Ordering cost: 10.16 x 60 = 636,6‬