Question

The WCU maintenance department used 850 brackets during the course of a year. The brackets are purchased from a supplier in Asheville. These brackets cost $10 apiece to purchase. The inventory holding coat as a percentage of cost that WCU uses for their accountants is 13%. Based on the number of orders that are placed each year, the cost of placing an order is $21. The supplier can get the brackets to WCU 3 days after receiving the order. The maintenance department operates 250 days per year. Determine: 1) how many brackets should be ordered when WCU places an order with their supplier, and, 2) how many brackets do they have when they should place a new order with the supplier.

Answer 1

Answer:

a. 166 units should be ordererd of brackets

b. They have when they should place a new order with the supplier 10 brackets

Explanation:

According to the given data we have the following:

Annual Demand= 850 brackets

Buying cost=$10

carrying cost=13%×$10=$1.30

ordering cost per order=$21

a. To calculate how many brackets should be ordered when WCU places an order with their supplier we have to calculate the EOQ as follows:

EOQ=√2AO

              C

EOQ=√2×850×21

               1-30

EOQ=166 Units

166 units should be ordererd of brackets

b. To calculate how many brackets do they have when they should place a new order with the supplier we would habe to make the following calculation:

Reorder point=Annual Demand        ×  lead time

                        working days in year

Reorder point=850  ×  3

                         250

=10 brackets

They have when they should place a new order with the supplier 10 brackets