Turfpro Company produces lawn mowers and purchases 7,200 units of a rotor blade part each year at
Question:
Turfpro Company produces lawn mowers and purchases 7,200 units of a rotor blade part each year at a cost of $60 per unit. Turfpro requires a 10% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $3 per unit per year. The relevant ordering cost per purchase order is $100.
1- Calculate Turfpros EOQ for the rotor blade part.
2- Calculate Turfpros annual relevant ordering costs for the EOQ as calculated in 1.
3- Calculate Turfpros annual relevant carrying costs for the EOQ as calculated in 1.
4- Assume that demand is uniform throughout the year and known with certainty so there is no need for safety stocks. The purchase-order lead time is half a month. Calculate Turfpros reorder point for the rotor blade part.