Problem: Carpenter Tools sells planers and is open for business 330 days a year. It costs the company $1100 each time it places an order with the manufacturer for the planers. The annual cost of carrying a planer in inventory is $30. The manager uses the Basic EOQ Model and forecasts an annual demand for the planers of 2640 units.
Q1. What is the economic order quantity?
Q2. What is the total minimum annual inventory cost?
Q3. What is the average inventory level?
Q4. How many orders per year will be required?
Q5. How long is the order cycle time? 10. Now assume the manager does not use the E00 model. Instead, the manager has been ordering 290 planers at a time. How much money will be saved in annual inventory costs if the company switches to the EOQ (assume no stockouts)?