Ergonomics Inc. sells ergonomically intended office chairs. The company has following information:
Average demand = 54 units for each day
Average lead time = 30 days
Item unit cost = $60 for orders of less than 250 units
Item unit cost = $58 for orders of 250 units or more
Ordering cost = $23
Inventory carrying cost = 20%
The business year is 260 days.
Suppose there is no uncertainty at all about the demand or lead time.
1. Evaluate EOQ if unit cost is $60 and $58.
Unit cost at 60?
Unit cost at 58?
2. Compute annual ordering costs for each alternative?
Unit cost at 60?
Unit cost at 58?
3. Compute annual inventory carrying costs for each alternative?
Unit cost at 60?
Unit cost at 58?
4. Compute the annual product costs for each alternative?
Unit cost at 60?
Unit cost at 58?
5. What will be the total costs for each alternative?
Unit cost at 60?
Unit cost at 58?
6. How many chairs must the firm order each time?
Order quantity of chairs?
7. How much the firm can save through placing the order?