Question

Italia Aerospace Industries (IAI) produces parts for Boeing and Airbus. One of their most important parts is the stringer—a critical part of a commercial aircraft’s fuselage. In order to produce these stringers, IAI needs fasteners, which they purchase in huge quantities from a Japanese firm. Italia Aerospace Industries will require 200,000 fasteners for next year. The cost of placing an order is $2,000 because of legal requirements. The unit cost of a fastener is $26. The holding cost for IAI is 13.5% of purchasing price. How many times per year would IAI have to place an order? (Round to two decimal places.)

Answer 1

Number of order = 13.2 times

Step-by-step explanation:

The economic order quantity is the order quantity that minimizes the total of ordering costs and holding costs.

EOQ is computed thus:

EOQ =√ (2× Co× D)/Ch

Co ordering cost - 2000,

Ch- holding cost - 13.5%× 26 =

A- annual demand - 200,000

EOQ = √(2× 2000× 200,000)/(13.5%× 26)

= 15,097.02712

The number of times IAI would place order

= Annual demand ?order quantity

= 200,000/15,097.02

= 13.2 times