Jose sells gym equipment from his house in Dorado. Annual demand for the PuertoFlexers, his best-selling product, is 2,000. Assume that the year has 360 days. The product has a cost value of $150 (this is what Jose pays.) The annual holding cost per unit is $5.50 and the cost to place an order is $25, and it takes an average of eight days to arrive.
a. What are the EOQ and total Cost of this situation?
b. how long does a cycle time last?
c. if jose has space for only 140 products, can all be stored in his facilities?
d. If Jose expects demand to rise by 15% next year, would he be required to make any warehousing arrangements?
e. If Jose´ gets a price discount based on the amount bought (see the range below), what is the EOT and Total Cost of the situation? (NOTE: For this question, use a holding cost of 12% of the price.)
Amount Range Cost/Unit
1-110 $150
111-140 $125
More than 141 $100