A company produces 450 bicycles a month and buys tyres from a supplier at a cost of $20 per tyre. The company’s inventory carrying cost is estimated to be 15% of cost and the ordering cost is $50 per order.
(a) Calculate the economic order quantity (EOQ).
(b) What is the number of orders per year?
(c) Compute the average annual ordering costs
(d) Compute the average inventory.
(e) What is the average annual carrying cost?
(f) Compute the total inventory costs.
(g) State any six assumptions of the EOQ model.