A local machine shop buys hex nuts and molly screws from the same supplier. The hex nuts cost $.40 each and the molly screws cost $1.20 each. An ordering cost of $200 is assumed for all orders. Holding costs are based on a 20% annual rate. The shop uses an average of 20,000 hex nuts and 15,000 molly screws annually.
a. What is the optimal order size for each of the 2 items?
b. What is the time between orders for each of the 2 items?
If both items are ordered at the same time, the $200 ordering cost is applied only once.
c. What would be the order quantity for ordering these 2 items together?
d. What would be the order quantity for hex nuts in this scenario? How about for molly screw?
e. What is the difference in total costs between ordering the items separately versus ordering them together?