EOQ and Reorder Point (CMA) ‘The Robney Company is a restaurant supplier that sells a number of products to various restaurants in the area. One of their products is a special meat cutter with a disposable blade.

The blades are sold in packages of 12 blades for $20.00 per package. After a number of years, it has been determined that the demand for the replacement blades is at a constant rate of 2,000 packages per month. The packages cost the Robney Company $10.00 each from the manufacturer and require a three-day lead time from date of order to date of delivery. The ordering cost is $1.20 per order and the carrying cost is 10 percent per annum.

. Calculate:

a. The economic order quantity.

b. The number of orders needed per year.

c. The total cost of buying and carrying blades for the year.
. Assuming there is no reserve (e.g., safety stock) and that the present inventory level is 200 packages, when should the next order be placed? (Use 360 days equals one year.)
. Discuss the problems that most firms would have in attempting to apply the EOQ formula to their inventory problems. lop5