A farmer sells every week 18 chickens. The supplier charges $60 per unit. The cost of placing an order (S) with the supplier is $45. The annual holding cost (H) is 25% of a feeder’s value, based on operations 52 weeks per year. The management chose a 390-unit lot size (Q) so that new orders could be placed less frequently.

1. What is the annual demand in units (D) for the inventory item?

2. Calculate the holding cost.

3. What is the annual cycle-inventory cost (C) of the current policy of using a 390-unit lot size?

4. Indicate in the following curve Q* and the corresponding annual cost.

5. Would a lot size of 465 be better? Justify in the following curve using Economic Ordering Quantity (EOQ) method.

 

For the following costs, give several examples. Holing/carrying cost Ordering/setup cost Production/purchasing cost Lost sales cost Shortage/stock-out cost Problem 2.2 A Company estimates its ordering cost at $90 per order and carrying cost at 15%. The estimated annual requirement is 480,000 units at a price of $40 per unit. 1. Using EOQ, calculate the economical number of units to order. 2. Calculate the number of order that shoud be placed in a year. Problem 2.3 A Company estimates an annual requirement D = 10,000 Unit. Known that Cc = $0.75 per unit and Co=$150, find: 1. Q 2. Minimum TC Problem 2.4 For the following conditions, find the annual cost of items using EOQ method. D=936 units, H=$15, S = $45 Problem 2.5 A farmer sells every week 18 chickens. The supplier charges $60 per unit. The cost of placing an order (S) with the supplier is $45. The annual holding cost (H) is 25% of a feeder's value,