Pena operates a manufacturing company that makes floor tiles. One of the major raw materials used is clay minerals, which Pena buys for $10 per kilogram. The factory operates for 350 days each year. The following information has been provided:

• Annual usage of clay minerals: 160,000 Kgs
• Average time between placing and receiving order for clay minerals: 8 days
• Estimated cost of ordering and receiving inventory (per order): $16
• Estimated annual cost of carrying a Kg of clay minerals in stock: $1

1. Use the above data to calculate:

1. Economic Order Quantity (EOQ)

2. Number of orders per year

1. After an analysis of the cost of storing clay minerals, including the cost of wasted space and inefficiency, Pena discovered that the annual carrying cost could be reduced to $0.40 per Kg. Pena negotiated a Just-In-Time (JIT) purchasing arrangement with a major supplier of clay minerals and, from this discussion, the cost of placing an order for clay minerals could be reduced to just $4 per order. Calculate:

1. Economic Order Quantity (EOQ)

2. New number of orders per year