Sylva Auto purchases a component used in the manufacture of automobile alternators directly from the supplier.
Sylva's alternator production operation, which is operated at a constant rate, will require 650 components per month throughout the year.
Assuming the ordering costs are$22 per order and the item is purchased from the supplier at a cost of $3.75 each.
The annual holding costs are 14% of the cost of the item. Sylva has 250 working days per year and the lead time is 5 days.
a) What is the EOQ for this component?
b) What is the reorder point?
c) What is the total annual ordering cost?
d) What is the total annual holding cost?
e) What is the average inventory that the Sylva holds for this item?
f) What is the average number of orders that Sylva places with their supplier per year for this item?