Q1

• Annual Demand = 1,000 units• Days per year considered in average daily demand =

365• Cost to place an order = $10• Holding cost per unit per year = $2.50• Lead time = 7 days• Cost per unit = $15

Determine the economic order quantity and the reorder point.

Q2

• A local distributor for national tire companyexpects to sell approximately 9,600 steel –belted radial tires of a certain size and treaddesign next year. Annual carrying costs are $16per tire, and ordering costs are $75. Thedistributor operates 288 days a year.

1. What is the EOQ?

2. How many times per year does the storereorder?

Q3

• A firm manufactures products in job lots and this year expects to sell 10,000 units of its 27-gallon cooler. The unit manufacturing cost of the cooler is $10. Setup costs of $625 include labour for making machine settings, installing the new dies, and other costs of setting up the production run of the coolers. The cost of storing and handling units is estimated at 20 percent of production cost. Compute the optimum production run.