M. cotteleer electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other

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 through out the year. carrying cost is estimated to be $1 per unit per year, and the ordering cost is $20 per order. a) to minimize cost, how many units should be ordered each time an order is placed? b) how many orders per year are needed with the optimal policy? c) what is the average inventory if costs are minimized?

Answers

a) 100 units

b) 2.5 order per year

c) 50 units

Explanation:

Given data:

demand 250 units

order cost is $20

holding cost $1

a) Economic order quantity EOQ = sqrt{frac{2times demand times order cost}{holding  cost}}

EOQ = sqrt{fac{2times 250 times 20}{1}} =100 units

b) number of order for each year = frac{annual/ demand}{EOQ}

                                                    = frac{250}{100} = 2.5order/ year

c) average inventory = frac{Q}{2} = frac{100}{2} =  50 units

205 units

Explanation:

In this question, we have to compute the economic order quantity which is shown below:

The formula to calculate the  economic order quantity is shown below:

= sqrt{frac{2times text{Annual demand}times text{Ordering cost}}{text{Carrying cost}}}

= sqrt{frac{2times text{250}times text{$21}}{text{$0.25}}}

= 205 units

In these units, the ordering cost and the carrying cost are equal so that no wastage of the stock is done and it tells about the minimum inventory the company has to produced.

Answer and Explanation:

The computation is shown below:

a. The computation of the economic order quantity is shown below:

= sqrt{frac{2times text{Annual demand}times text{Ordering cost}}{text{Carrying cost}}}

= sqrt{frac{2times text{265}times text{$19}}{text{$1.25}}}

= 90 units

b. The number of orders would be equal to

= Annual demand ÷ economic order quantity

= 265 ÷ 90 units

= 3 orders per year

c. The average inventory is

= Economic order quantity ÷ 2

= 90 units ÷ 2

= 45 units

d. Now in this we have to find out the ordering cost which is shown below by applying the economic order quantity formula

Economic order quantity = sqrt{frac{2times text{Annual demand}times text{Ordering cost}}{text{Carrying cost}}}125 units = sqrt{frac{2times text{265}times text{ordering cost}}{text{$1.25}}}

After squaring both the sides, the ordering cost is $36.85

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:

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

Where:

D = annual demand =250

S= setup cost = ordering cost =20

H= Holding Cost =1.00

Q_{opt} = sqrt{frac{2(250)(20)}{1}}

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:

150 = sqrt{frac{2(250)(S)}{1}}

150^2 = 500(S)}

22,500 / 500 = S}

S = $45

The quanitity per order that minimizes the cost is 137.84 units.

Explanation:

The EOQ or economic order quantity is the quantity that should be ordered per order to minimize the cost of ordering and holding inventory. To calculate the number of units that should be ordered per order to minimize cost, we need to calculate the EOQ.

EOQ = √(2*D*O)/H

Where,

D is the annual demand in unitsO is the ordering cost per orderH is the holding/carrying cost per unit per annum

Thus,

EOQ = √(2 * 250 * 19)/0.5

EOQ = 137.84  

It depends on how many they want to order at a time if they do 4 orders a year at ordering 65 units each order they will spend $37.25 each order and $149.00 a year or they could buy they whole amount that they are needing for the year say the whole 260 units in one order and spend $86 on one order

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