The Las Vegas Corporation purchases a critical component from one of its key suppliers. The operations manager wants to determine the economic order quantity, along with when to reorder, to ensure the annual inventory cost is minimized. The information obtained from historical data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Round your answers according to the input instructions for each question but use unrounded values in all calculations.
Questions
1. What is the economic order quantity? Round your answer to the nearest whole number.
units
2. What is the annual purchase cost? Round your answer to the nearest dollar.
$
3. What is the annual holding cost? Round your answer to the nearest dollar.
$
4. What is the annual order cost? Round your answer to the nearest dollar.
$
5. What is the total annual inventory cost? Round your answer to the nearest dollar.
$
6. What is the reorder point? Round your answer to the nearest whole number.
units
7. What is the number of orders placed per year? Round your answer to the nearest whole number.
orders
8. What is the time between orders? Round your answer to the nearest whole number.
days
Homework Answers
| Days per year= | 360 | ||
| Annual demand, D= | (demand per day)*(days per year) | 6,200 | |
| Order cost or setup cost, S | 90.00 | ||
| item cost,P | $22.00 | ||
| holding cost percent | 16.00% | ||
| holding cost per year, H= | (holding cost percent)*(item cost) | $3.52 | |
| Lead time, LT | 4 | ||
| Economic Order quantity, Q= | squareroot(2*S*D/H) | 563.07 | |
| Economic Order quantity (Rounded up) | 563 units | Answer 1 | |
| annual holding cost= | Q*H/2 | $ 991.00 | Answer 3 |
| Annual ordering cost= | D*S/Q | $ 991.00 | Answer 4 |
| Annual Purchasing cost= | (annual demand)*(item cost) | $136,400.00 | Answer 2 |
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The Las Vegas Corporation purchases a critical component from
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