An automobile manufacturer uses about 60,000 pairs of bumpers (front bumper and rear bumper) per year, which it orders from a supplier. The bumpers are used at a reasonably steady rate during the 240 working days per year. It costs $3.00 to keep one pair of bumpers in inventory for one month, and it costs $25.00 to place an order. A pair of bumpers costs $150.00.

a. Which inventory model should be used here: How do you know?

b. Write the annual carrying cost function, annual ordering cost function, the annual total cost function.

c. What is the EOQ?

d. How many orders will be placed per year?

e. What is the total annual expense of ordering 600 pairs of bumpers every time? How much is saved per year by ordering the EOQ?