A Local Artisan Uses Supplies Purchased from an Overseas Supplier

question 144

Essay

A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) =150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year
a. How many should she order at one time?
b. How many times per year will she replenish her inventory of this material?
c. What will be the total annual inventory costs associated with this material?
d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ?

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Definitions:

OCD

Obsessive-Compulsive Disorder, a mental health disorder characterized by unwanted repetitive thoughts (obsessions) and behaviors (compulsions).

Hallucinations

Experience of sensing things while awake that appear to be real but instead have been created by the mind.

Sensations

Feelings or perceptions resulting from something that happens to or comes into contact with the body.

SAD

Seasonal Affective Disorder, a type of depression that occurs at a particular time of the year, usually in winter.