Carl’s Computers
Carl’s Computers
Case analysis: 1. Using the data on the two part numbers given, provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost with the cost of using a system such as EOQ, and discuss any other order policies as appropriate.
A233 circuit board:
Average weekly usage = 32 units
A (Annual demand) = 32 units *52 week = 1664 units
Lead time = 1 week c (unit cost) = $18 i = 23%
23% inventory holding cost: $18 *23% = $4.14
S (order cost) = $16 per order
Q (order quantity) = 64 units
Annual purchasing cost = A * c = 1664 * $18 = $29,952
Annual ordering cost = A/Q *S = 1664/64 * $16 = $416
Annual carrying cost = Q/2 * c * i = 64/2 * $18 * 0.23 = $132.48
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $29,952 + $416 + $132.48 = $30,500.48
EOQ = SQRT (2AS/ic) = SQRT (2 * 1664 * 16/ 4.14) = 113.41 units
Now, Q = 114 units
Annual purchasing cost = A * c = 1664 * $18 = $29,952
Annual ordering cost = A/Q *S = 1664/114 * $16 = $233.54
Annual carrying cost = Q/2 * c * i = 114/2 * $18 * 0.23 = $235.98
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $29,952 + $233.54 + $235.98 = $30,421.52
P656 power supply:
Average weekly demand = 120 units
A (Annual demand) = 120 units *52 week = 6240 units
Lead time = 2 weeks c (unit cost) = $35 i = 23%
23% inventory holding cost: $35 *23% = $8.05
S (order cost) = $2 per order
Q (order quantity) = 350 units
Annual purchasing cost = A * c = 6240 * $35 = $218,400
Annual ordering cost = A/Q *S = 6240/350 * $2 = $35.66
Annual carrying cost = Q/2 * c * i = 350/2 * $35 * 0.23 = $1408.75
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $218,400 + $35.66 + $1408.75 = $219,844.41
EOQ = SQRT (2AS/ic) = SQRT (2 * 6240 * 2/ 8.05) = 55.68 units
Now, Q = 56 units
Annual purchasing cost = A * c = 6240 * $35 = $218,400
Annual
Case analysis: 1. Using the data on the two part numbers given, provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost with the cost of using a system such as EOQ, and discuss any other order policies as appropriate.
A233 circuit board:
Average weekly usage = 32 units
A (Annual demand) = 32 units *52 week = 1664 units
Lead time = 1 week c (unit cost) = $18 i = 23%
23% inventory holding cost: $18 *23% = $4.14
S (order cost) = $16 per order
Q (order quantity) = 64 units
Annual purchasing cost = A * c = 1664 * $18 = $29,952
Annual ordering cost = A/Q *S = 1664/64 * $16 = $416
Annual carrying cost = Q/2 * c * i = 64/2 * $18 * 0.23 = $132.48
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $29,952 + $416 + $132.48 = $30,500.48
EOQ = SQRT (2AS/ic) = SQRT (2 * 1664 * 16/ 4.14) = 113.41 units
Now, Q = 114 units
Annual purchasing cost = A * c = 1664 * $18 = $29,952
Annual ordering cost = A/Q *S = 1664/114 * $16 = $233.54
Annual carrying cost = Q/2 * c * i = 114/2 * $18 * 0.23 = $235.98
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $29,952 + $233.54 + $235.98 = $30,421.52
P656 power supply:
Average weekly demand = 120 units
A (Annual demand) = 120 units *52 week = 6240 units
Lead time = 2 weeks c (unit cost) = $35 i = 23%
23% inventory holding cost: $35 *23% = $8.05
S (order cost) = $2 per order
Q (order quantity) = 350 units
Annual purchasing cost = A * c = 6240 * $35 = $218,400
Annual ordering cost = A/Q *S = 6240/350 * $2 = $35.66
Annual carrying cost = Q/2 * c * i = 350/2 * $35 * 0.23 = $1408.75
Total annual costs = annual purchasing cost + annual ordering costs + annual carrying costs = $218,400 + $35.66 + $1408.75 = $219,844.41
EOQ = SQRT (2AS/ic) = SQRT (2 * 6240 * 2/ 8.05) = 55.68 units
Now, Q = 56 units
Annual purchasing cost = A * c = 6240 * $35 = $218,400
Annual