Question
An oil drilling company, AccuDrill, wear out drill at a rate of 4 per day. The drill is operated 5 days a week. 50 weeks
An oil drilling company, AccuDrill, wear out drill at a rate of 4 per day. The drill is operated 5 days a week. 50 weeks a year. The bits cost $70 each, and the annual holding cost is 18 percent of purchase price. Ordering cost is $10 for each order. Assume the usage rate of drill bits is constant. Determine the following: show detail of your work
a. Annual demand for drill bits.
b. The economic order quantity
c. Maximum inventory of bits, assume no safety stock
d. the frequency with which drills are reordered
e. suppose a review of this process indicate that holding costs have increase to 25 percent due to increased opportunity costs, and that order is $12, what EOQ would now be appropriate?what cost penalty would company incur by staying with former EOQ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started