Question
Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power supply in both civil and private disaster situations. Each
Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power supply in both civil and private disaster situations. Each year it produces 16,000 of its model HI-360 units. This model used two bearings, which the company purchases from an outside vendor. A review of accounting and usage records reveals the following information:
labour for installing the bearings = $8 per generator;
per-unit cost of bearings = $25;
delivery charges per order = $5;
processing costs per order = $6;
mailing expenses per order = $2; and
the estimated cost of carrying one bearing in inventory for the ear = $0.35.
GRU also found that on average four days elapse between the time an order is placed and the time items are received. Required: a) Compute the economic order quantity. b) Compute the reorder point. Assume that the HI-360 model is manufactured for 350 days each year
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