EAQ Calculatioms

Knutson Products Inc. is involved in the production of airplane parts and has the followinginventory, carrying, and storage costs:

1. Orders must be placed in round lots of 100 units.

2. Annual unit usage is 350000 (Assume a 50-week year in your calculations.)

3. The carrying cost is 10 percent of the purchase price.

4. The purchase price is $10 per unit.

5. The ordering cost is $500 per order.

6. The desired safety stock is 5000 units. (This does not include delivery-time stock.)

7. The delivery time is 4 week.

Given the foregoing information:

a.Determine the optimal EOQ level.

b.How many orders will be placed annually?

c.What is the inventory order point? (That is, at what level of inventory should a new order be placed?)

d.What is the average inventory level?