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. Answer questions 6-11 based upon using the EOQ model.
1. What is the economic order quantity (EOQ) that will minimize inventory costs?
o 661.8
o 456.5
o 371.7
o 278.3
2. What is the average number of units in inventory based upon ordering using the EOQ?
o 343.6
o 228.3
o 330.9
o 139.2
3. What is the average dollar value of inventory based upon ordering using the EOQ?
o $48,135.10
o $21,750.01
o $35,735.76
o $41,363.48
4. What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon using the EOQ?
o $721,100.42
o $686,029.54
o $578,900.29
o $652,380.39
5. What is the optimal reorder point based upon using the EOQ?
o 30
o 45
o 60
o 75
6. How many orders per year will be necessary based upon using the EOQ?
o 20.5
o 15.9
o 23.4
o 29.1