Problem:
The Salesworthy Sprokets company purchase a sprocket flange used in the manufacture of aircraft door hinges directly from the supplier. Salesworthy's hinge production line, which is operated at a constant rate, will require 1,000 flanges per month throughout the year (....12,000 per year). if the administrative cost of placing and receiving an order is $ 25 per order, if the flanges cost $ 2.50 each, and if the per annum inventory holding charge is 20% based on average levels:
a) What is the EOQ for this component; and what is the total annual inventory ordering and carrying cost for the year? ( EOQ=1096; TC=$547.72; OC=$ 273.72; CC=$ 274.00). Please show all work.
b) Supposed the problem is changed such that yearly demand is now $ 10,000 worth of sealing gook (.... in 1 gallon cans, priced at wholesale), instead of the 520 cans per month. From this new data, recalculate the EOQ and the total cost equations.