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Q1

Annual Demand = 1,000 units

Days per year considered in average daily demand =

365

Cost to place an order = $10

Holding cost per unit per year = $2.50

Lead time = 7 days

Cost per unit = $15

Determine the economic order quantity and the reorder point.

Q2

A local distributor for national tire company

expects to sell approximately 9,600 steel

belted radial tires of a certain size and tread

design next year. Annual carrying costs are $16

per tire, and ordering costs are $75. The distributor operates 288 days a year.

1. What is the EOQ?

2. How

times

many

reorder?

per

year

does

the

store

Q3

A firm manufactures products in job lots and this year

expects to sell 10,000 units of its 27-gallon cooler. The

unit manufacturing cost of the cooler is $10. Setup costs

of $625 include labour for making machine settings,

installing the new dies, and other costs of setting up the

production run of the coolers. The cost of storing and

handling units is estimated at 20 percent of production

cost. Compute the optimum production run.