Here is the first part of the question.
Task 1. A wholesale distributor stocks and sells low flow toilets to contractors for use in commercial office buildings. The estimated annual demand for the toilets is 5,475 units. The estimated average demand per day is 18 units.
The purchase cost from the toilet manufacturer is $135.00 per unit. The lead-time for a new order is 5 days. The ordering cost is $90.00 per order. The average holding cost per unit per year is $4.05. The distributor has traditionally ordered 210 units each time they placed an order.
Based upon using the distributor's current ordering model: NOTE: UNLESS EXPRESSLY STATED CARRY YOUR ANSWERS TO TWO (2) DECIMAL PLACES.
Task 2. The president of the wholesale distributor has recently heard about the EOQ model and is interested in learning whether or not using this model would allow the company to reduce its annual costs by optimizing the number of orders placed each year and the number of toilets purchased in each order.
The estimated annual demand for the toilets, estimated average demand per day, purchase cost from the toilet manufacturer per unit, lead time for a new order, ordering cost per order and average holding cost per unit per year remain the same as stated in the scenario for the current ordering model. Based upon using the EOQ model (with instantaneous receipt):
: What is the economic order quantity (EOQ) that will minimize inventory costs?
: How many orders per year will be necessary based upon using the EOQ?
: What is the average number of units in inventory based upon ordering using the EOQ?
What is the average dollar value of inventory based upon ordering using the EOQ?
What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon using the EOQ?
What is the optimal reorder point based upon using the EOQ?