Question

A local food processing firm uses (demand) 24,000 glass jars to produce gourmet jams and jellies per year. It costs the firm $60 each time it places an order for jars with a lead time of 10 days. The firm operates 300 days a year. It currently has 200 jars in stock. What is the Economic Order Quantity (EOQ) for the glass jars, and how many orders should the firm place per year? What will be the reorder point?

Answer 1

To calculate the Economic Order Quantity (EOQ), use the formula: EOQ = √(2DS/H). Without the holding cost value, we cannot calculate the EOQ or the number of orders per year. The reorder point is calculated by multiplying the lead time by the demand rate per day and adding the safety stock (if any) to it.

Step-by-step explanation:

To calculate the Economic Order Quantity (EOQ), we can use the formula: EOQ = √(2DS/H), where D is the annual demand, S is the cost per order, and H is the holding cost per unit. In this case, D = 24,000, S = $60, and H is not given. Therefore, we cannot calculate the EOQ without the holding cost value. The number of orders per year can be calculated by dividing the annual demand by the EOQ value. The reorder point can be calculated by multiplying the lead time by the demand rate per day and adding the safety stock (if any) to it.