The ABC Bumper Inc. manufactures bumpers for automobiles for one of the big three auto companies. About 60,000 pairs of bumpers (front bumper and rear bumper) are ordered by the auto company per year, at a price of $150.00 per pair. Pairs of bumpers are produced at a rate of about 400 per working day, and the company operates 240 days per year. The company manufactures other products, and it must set up the manufacturing system for a production order for pairs of bumpers, which costs $250.00. It costs $2.50 to store one pair of bumpers for one month.
a. What is the EOQ?
b. What is the annual carrying cost?
c. What is the annual setup cost?
d. What is the annual total cost?
e. What is the total annual expense of producing the EOQ every time?
f. How many production runs will be required per year?
g. What is the total annual expense of manufacturing 3,000 pairs of bumpers per production run? How much is saved per year by producing the EOQ every time?