Motley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks. Each truck trip costs $700, regardless of how many engines are loaded onto the truck (assume the truck has unlimited capacity). The motorcycle plant assembles and sells 600 motorcycles each day. Each engine costs $500 and the motorcycle plant incurs a holding cost of $0.274 per engine per day.
1. How many engines should Motley order when they place an order (compute the economic order quantity)?
2. What is the resulting cycle inventory of engines at Motley?
3. How many days are there between two orders?
4. How many orders will the Motley motorcycle plant place per year (assume the plant operates 365 days a year).
5. Compute the annual total controllable cost for the Motley motorcycle plant (annual inventory holding cost plus annual ordering cost).