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Lee Cycles produces bicycles and buys brakes from a supplier in Japan. The brake set for one bicycle costs $125, and it is $35 to process the order with the supplier. The company consistently sells 50 bicycles a week (for 52 weeks of the year) and holds an average of 2 weeks of brake sets in inventory to cover the constant lead time from Japan. The company uses a holding/carrying rate of 20%.

a. What is the average inventory carrying/holding cost for the brakes?

b. What is the EOQ for this product?

c. What buying strategy would be most appropriate for the brakes and why?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91760955

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