Discuss the below:
Q: The manager of a hardware store is reviewing inventory policies for various items. Current policy is to replenish inventory for a particular item with weekly demand of 60 units by ordering 360 units at a per unit cost of $80. The cost associated with placing an order is estimated at $30 and holding costs are figured annually at 25 percent of the unit cost. The hardware store is open 52 weeks per year.
1. What is the economic order quantity?
2. Determine the total annual cost using the EOQ.
3. Determine the total annual cost using the current policy of ordering 360 units.
4. How does the total annual cost of the current policy compare with that of the economic order quantity?
5. What is the duration of a cycle, expressed in weeks, for the current policy?
6. What is the duration of a cycle, expressed in weeks for the economic order quantity?
7. Determine the EOQ reorder point if lead time is 1 week.
8. Determine the EOQ reorder point if lead time is 2 weeks.
9. Using the EOQ, how many orders are placed per year?
10. Using the EOQ, what is the Annual Ordering Cost (AOC)?