How large should the standard size order be for this product? How much is the Purchasing directors policies costing your Company?
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You have just met with the director of purchasing. He has been attempting to reduce his costs by placing fewer orders(but larger)orders for raw materials. You suspect that his dept.'s actions have been contributing to the company's DOS.
I need to calculate EOQ/ELS for the following two questions. I need to show the full calculations. Please HELP! I am so lost!
Annual demand has historically been about 15,000 units. Each unit costs about $0 dollars. For the annual report due in June, the Corp. Accounting Dept calculates inventory holding costs by multiplying the value of each item by 40 cents. The Director of Purchasing told you that his "cost of ordering is about 82 dollars per order. He is currently ordering 1,000 at a time. How large should the standard size order be for this product? How much is the Purchasing directors policies costing your Company? Calculate the ordering and holding costs associated with his policies and compare them with the optimal ordering and holding costs.
2. Annual demand has historically been about 5,700 units. The sales price for each unit of CLM is about 48 dollars. The production line that produces CLM can make 100 units a day, but currently has 170 days per year devoted to manufacturing another project---assume 250 total production days per year. The set up cost for product CLM averages 500 dollars per set up. How large should the production runs be for CLM?
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