Question

Joe Henry's machine shop uses 2460 brackets during the course of a year. these brackets are purchased from a supplier 90 miles away. The following information is known about the brackets:

Annual Demand: 2460
Holding Cost per bracket per year: $1.40
Order cost per order: $19.75
Lead Time: 2 days
Working days per year: 250
Given the above information, what would be the economic order quantity (EOQ)?

Answer 1

The economic order quantity (EOQ) is used to determine the optimal order quantity for inventory management. For Joe Henry's machine shop, the EOQ would be approximately 264 brackets.

Step-by-step explanation:

The economic order quantity (EOQ) is a formula used to determine the optimal order quantity for inventory management. It helps to minimize the total cost of inventory by balancing the ordering cost and holding cost.

The formula for EOQ is:

EOQ = sqrt((2 * Annual Demand * Order Cost) / Holding Cost)

Given the information provided:

• Annual Demand: 2460 brackets
• Holding Cost per bracket per year: $1.40
• Order cost per order: $19.75

Plugging these values into the formula, we get:

EOQ = sqrt((2 * 2460 * 19.75) / 1.40) = sqrt(97524 / 1.40) = sqrt(69660) ≈ 263.95

Therefore, the economic order quantity (EOQ) for Joe Henry's machine shop would be approximately 264 brackets.