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Joe Henry's machine shop: Inventory problem

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Joe Henry's machine shop uses 2500 brackets per year. Brackets are purchased from a supplier 90 miles away.

Annual demand = 2500
Holding cost per bracket per year = $1.50
Order cost per order = $ 18.75
Lead time = 2 days
Working days per year = 250

A. What is economic order quanity
B. Given EOQ, what is average inventory. What is average inventory holding cost?
C. Given EOQ, how many orders would be made each year? What would be the annual costs
D. What is total annual cost of managing the inventory?
E. What is the time between order.
F. What is the reorder point.

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Solution Preview

A.  What is economic order quanity
EOQ 250 Brackets

B.  Given EOQ, what is average inventory.  What is average inventory holding cost?
Average inventory=EOQ/2
Average inventory 125 Brackets

Annual holding cost=Average ...

Solution Summary

This posting contains solution to following Inventory management problem.