1- Jack’s Tracks sells 24,000 custom-designed GoKarts per year.

These GoKarts are

sold evenly throughout the year. The manufacturer charges Jack a $50 processing cost
per order, and Jack incurs a carrying cost of $240 per year including storing each
GoKart at a local warehouse. What is the economic order quantity for ordering
materials?
a. 100 b. 1,000
c. 2,000 d. 10,000

2  24, 000  $50 100 Go-Karts per order

=
2 DP
EOQ  
C 240

2- RightTime (RT) Corporation operates a retail store featuring wristwatches. It

maintains an EOQ decision model to make inventory decisions. Currently, it is
considering inventory decisions for its TagMe wristwatches product line, which is a
very popular product line. Data for 2017 are as follows:

Expected annual demand for TagMe watches 7,000

Ordering cost per purchase order $300
Carrying cost per year $14 per wristwatch
The purchasing lead time is 10 days. RT is open 365 days a year.
Required:

1. Calculate the EOQ for the TagMe product line.

2. Calculate the number of orders that will be placed each year.
3. Calculate the reorder point.

1. D = 7,000 watches per year, P = $300, C = $14 per watch per year
2 DP 2  7, 000  $300
EOQ   = 547.72 ≅ 548 watches
C 14

D 7, 000
2. Number of orders per year = = = 12.77 ≅ 13 orders
EOQ 548

Demand each
3. Reorder point = Purchase lead time x working day

Demand each D 7, 000

working day = Number of working days = 365 = 19.18 watches per day

Demand each
Reorder point = Purchase lead time x working day = 19.18  10 = 19.18  192
watches