Question 4: (40 marks)

Assume you have a product with the following parameters:

Annual demand= 360 units

Holding cost per year = 1 $ per unit

Ordering cost = $ 100 per order

Requirement:

1-What is the EOQ for this product (7.5 marks).?

2- What is the total holding and ordering costs (7.5 marks)?

3-Given the above data, how many orders should be processed per year (5 marks)? Assuming a 300-day work what is the expected time (days) between orders (5 marks)?

4-Based on the information from 1 to 3 above, what would the actual total holding and ordering costs be if the annual demand was actually higher than estimated i.e 500 units instead of 360 units, but the EOQ established in question 1 above is used (10 marks)?

5-If demand for an item is 3 units per day, and delivery lead time is 15 days, what would be the re-order point (5 marks)?