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15 Burwash Company currently has a shop selling farm products at their farm. The purchasing manager realises they need to be more logical about
15 Burwash Company currently has a shop selling farm products at their farm. The purchasing manager realises they need to be more logical about the quantities of non-perishable foods they buy Currently they order 500 jars of jam every time they order. The purchasing manager has heard about using an Economic Order Quantity calculation and has provided the following information. Annual demand for jam is 6,000 jars. They cost 0.60 per unit to store for a year. The current supplier charges a 45 fixed ordering fee, as ensuring the right jam is delivered requires a person to check the order. Q6(a). With regard to the jam, calculate the quantity to be ordered using economic order quantity (EOQ), (round up to the nearest unit). (2 marks) Q6(b). You are now told there is the opportunity to use a new supplier whose ordering costs are higher at 80 per order but they are packaged in such a way that holding costs fall to 0.40 per jar. Calculate a revised EOQ, (round up to the nearest unit). (2 marks) Q6(c). What does the EOQ represent? Also, explain the elements of the total annual cost of inventory and explain how the EOQ is an important calculation when calculating this total cost. (No calculations are required here). Fill in your answer here (6 marks) BIUX, T. G
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