IM.74 Due to popular demand, the instructor is contemplating having the students play a third round of the Littlefield Technologies simulation this semester. For this potential round the data will be much different than in previous rounds. Daily demand is going to be 18 jobs per day. Ordering costs are expensive at $1,250 each time a materials order is placed with the supplier. Materials cost will be $425 for each job's worth of materials. Each job consists of 40 kits or units. There are no holding costs, but for this round the simulator will pay 11% annual interest on all cash balances. The simulation will again run for 268 total simulated days. (Assume there are 365 days per year.) What is the economic order quantity (EOQ) for the purchase of kits—not jobs? (Display your answer to the nearest whole number.) Number Given your answer to the previous question, and supposing that the game ran indefinitely (beyond 268 simulated days), how many times in any given simulated year would the simulator place an order for materials? (Display your answer to two decimal places.) Number

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Answer:

EOQ 20,316 kits per order

order per year: 9.49

Explanation:

[tex]Q_{opt} = \sqrt{\frac{2DS}{H}}[/tex]

D = annual demand = 18 jobs per day x 268 days per year x 40 kit per job = 192,960

 

S= setup cost = ordering cost 1,250

 

H= Holding Cost = $425 cost of 40 kits --> 10.625 per kit at 11% = 1.17

[tex]Q_{opt} = \sqrt{\frac{2(192,960)(1,250)}{1.17}}[/tex]

EOQ = 20316.21675  = 20,316 kits

192,960 / 20,316 = 9.497831331

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