Subject : Production planning and control

a) Joe Henry's machine shop uses 2.500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away The following information is known about the brackets:

Annual demand. 2500

Holding cost per bracket per year: $1.50 Order cost per order: $18.75

Lead time 2 days

Working days per year. 250

1) What is the EOQ?

II) What is the average inventory if the EOQ is used? What would be the annual inventory holding cost?

iii) What is the optimal number of orders per year? What would be the annual order cost?

(v) What is the total annual cost of managing the inventory?

v) What is the optimal number of days in between any two orders?

vi) What is the reorder point (ROP)