QUESTION 2-A

Johnson Peters holds the position of operations manager for a small container and bottle manufacturing company. His job description includes managing inventory levels, supervision of operation, leading his team etc. Annually there is usually a quick turn over of inventory items. One of the main items (bottle caps) have a demand of 8,000 units per day. The actual cost of each unit is $150, and the inventory holding cost per years is 10% of the unit price. The average setup cost is $17.85. There are 300 working days per year, and it takes an order about 5 days to arrive by boat.

1. What is the EOQ?
2. What is the average inventory if the EOQ is used?
3. What is the optimal number of orders per year?
4. What is the optimal number of days in between any two orders?
5. What is the annual cost of ordering?
6. What is the annual cost of holding inventory?
7. Including the cost of the 8,000 units. What is the total annual inventory cost?
8. What is the total annual cost?
9. What is the re-order point?