Saga ltd. produces electronic toys for children between the ages of 7-10 years old.
The toys use a processor that is imported from Japan. Annual demand for the processor is 12,500. The holding cost per processor per year is $2.
Ordering cost per order is $400. Lead time is 7 days and the number of working days in the year is 250.
a. What is the economic order quantity?
b. What is the optimal number of orders per year?
c. Calculate the annual holding cost if the economic order quantity is used.
d. What is the optimal number of days between any two orders?
e. What is the reorder point?
f. Given the EOQ, what is the total annual inventory cost?