Perko's aftermarket (packaged for retail) battery switches are made to stock with distributors and retailers ordering in master carton quantities of 25 pieces. We plan to add a new product this year. It will be offered to the aftermarket only and will be a conventional battery switch but with LED indicators. Perko does not manufacture LED light engines in-house. Rather it relies on a subcontractor and orders light assemblies in the same 25 piece multiple as battery switches are sold. An LED light engine cost Perko $14.50 delivered.
The expected demand for these new battery switches will be highly seasonal as are all aftermarket battery switches.
During the slow season (February through July) the expected demand will be about 325 master cartons per month. During the busy season (August through January) demand should be about 900 master cartons.
The cost to place an order for LED light assemblies is $25.00.
The unit cost for an LED light assembly is $14.50
The annual holding cost is 3.5% of the purchase price.
1) According to the EOQ formula on page 107 how many LED light assemblies should be ordered at a time during the slow season? How many LED light assemblies should be ordered during the busy season? Remember to maintain the 25 piece multiple quantities.
2) Assuming a 5-day week, no Holidays and a steady monthly demand of 750 master cartons per month all year long, can you figure out the time between orders?
NOTE: If you use an EXCEL spreadsheet to answer the question(s), please make sure to highlight your answers so that they are obvious. Also, make your spreadsheet easy to follow so that you can get credit for work done in the event your answer is not exactly correct.
NOTE: Focus your time primarily on Question 1. Question 2 is more an exercise in reasoning. It will not count significantly towards your grade as the text does not offer a "simple" way to estimate the time between orders.