1.Ergonomics, Inc. sells ergonomically designed office chairs.The company provided the following information:

Average Demand = 15 units per day

Average lead time = 20 days

Item unit cost = $60 for orders of less than 200 units

Item unit cost = $58 for orders of more 200 units or more

Ordering costs = $20

Inventory carrying costs = 21%

The business year is 250 days

Based on the above information:

a. How many chairs should the firm order each time?

b. What will the firm's average inventory be under each alternative?

c. What will be the breakdown of cost for each alternative?

Assume there is no uncertainty at all about demand or the lead time.

Below is a similar example problem......

Example Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:

Average demand = 20 units per day

Average lead time = 30 days

Item unit cost = $50 for orders of less than 200 units

Item unit cost = $48 for orders of 200 units or more

Ordering cost = $25

Inventory carrying cost = 25%

The business year is 250 days

The basic question: How many chairs should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time. There are many associated questions such as what will the firm's average inventory be under each alternative? What will be the breakdown of costs for each alternative?

SOLVED

The EOQ and TAC at the $50 price is: