Question
QUESTION 4. Evans Company has the following information: Annual demand4000 units Order size1000 units Ordering cost per order500 Carrying costs per unit for one year50
QUESTION 4.
Evans Company has the following information:
Annual demand4000 units
Order size1000 units
Ordering cost per order500
Carrying costs per unit for one year50
Lead time (maximum 20 days)10 days
Maximum daily use25 units
Work year250 days
Required:
(a)Determine the economic order quantity for Evans.
(b)What is the annual savings to Evans Company if it was to change from an order size of 1000 to the economic order quantity? Discuss
(c) What is the reorder point? Discuss.
(d) What is the safety stock needed to prevent stock-outs? Discuss.
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Managerial Economics Foundations of Business Analysis and Strategy
Authors: Christopher Thomas, S. Charles Maurice
11th edition
978-0078021718
