Question: Task 1. A wholesale distributor stocks and sells low flow toilets to contractors for use in commercial office buildings. The estimated annual demand for the toilets is 5,475 units. The estimated average demand per day is 18 units. The purchase cost from the toilet manufacturer is $135.00 per unit. The lead-time for a new order is 5 days. The ordering cost is $90.00 per order. The average holding cost per unit per year is $4.05. The distributor has traditionally ordered 210 units each time they placed an order. Based upon using the distributor's current ordering model:
Task 3. The wholesale distributor has traditionally relied upon an instantaneous receipt model in which the material associated with each order is received in a single batch. The toilet manufacturer has suggested to the president of the wholesale distributor that he might want to consider agreeing to accept receipt of ordered material incrementally over a period of time rather than in a single batch as a means for reducing total annual costs. The toilet manufacturer has advised that his factory's daily production rate is 32 toilets and the set-up cost for each production run is $325. The estimated annual demand for the toilets, estimated average demand per day, purchase cost from the toilet manufacturer per unit, lead time for a new order, ordering cost per order and average holding cost per unit per year remain the same as stated in the scenario for the current ordering model. Based upon using the EOQ model without instantaneous receipt (a.k.a., production run model):
1: What is the optimal order quantity without instantaneous receipt?
2: What is the maximum number of units in inventory without instantaneous receipt?
3: What is the average number of units in inventory without instantaneous receipt?
4: What is the average dollar value of inventory without instantaneous receipt?
5: What is the total annual cost (i.e., Purchase Cost + Ordering Cost + Holding Cost) without instantaneous receipt?
6: What is the optimal reorder point without instantaneous receipt?
7: How many set-ups per year will be necessary without instantaneous receipt?