Assignment:
Cress Electronic Products manufactures components used in the automotive industry. Cress purchases parts for use in its manufacturing operation from a variety of different suppliers. One particular supplier provides a part where the assumptions of the EOQ model are realistic. The annual demand is 1200 units, the ordering cost is $50 per order, and the annual holding cost rate is 25%.
a. If the cost of the part is $30 per unit, what is the economic order quantity?
b. Assume 300 days of operation per year. Cress Electronics wants a 99% service level. If the lead time for an order is 10 days and the standard deviation of daily demand is 2, what is the reorder point with safety stock?
c. What is the total annual cost
d. The supplier has informed Cress that it can offer the following quantity discounts
|
Quantity
|
Price
|
|
1-499
|
$30
|
|
500-1499
|
$28
|
|
1500 and above
|
$27
|
Based on this information in what quantity should Crest choose when making orders?