1.Using the Data on the Two Part Numbers Given, Provide a Comprehensive Evaluation of the Ordering Policies. Compare the Present Annual Average Cost with the Cost of Using a System Such as Eoq, and Discuss Any Other Order Policies as Appropriate.

Group A Case studies---Carl’s Computers

Case Analysis:

1. Using the data on the two part numbers given, provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost with the cost of using a system such as EOQ, and discuss any other order policies as appropriate.

Analysis:

We will compare the present annual average cost with the cost of using EOQ for parts A233 circuit board and P656 powder supply respectively.

----A233 circuit board

Present:

Lead time:7days

Weekly demand=32 units/week

Annual demand=32 units/week x 52 weeks=1664 units

Unit cost=$18/unit;

Order cost=$16/order;

Lot size/order=64 units/order

Holding cost/unit=Unit cost x 23%=$18x23%=$4.14/unit

Total material cost= Annual demand x unit cost=1664 unitsx$18/unit=$29,952

Total holding cost=Average Inventory( Lot size/2)x Holding cost/unit=$132.48

Total ordering cost= (Annual demand/ Lot size)x Order cost=$416

Present annual average total spent=Total material cost + Total holding cost +Total ordering cost=$29,952+$132.48+$416=$30,500.48

EOQ method:

EOQ= (2 x Annual demand x Order Cost /Holding Cost)^0.5=114 units

So now the Lot size/order=114 units/order

Total material cost= Annual demand x unit cost=1664 unitsx$18/unit=$29,952

Total holding cost=Average Inventory( EOQ/2)x Holding cost/unit=$235.98

Total ordering cost= (Annual demand/ EOQ)x Order cost=$240

Cost of using EOQ=Total material cost + Total holding cost +Total ordering cost=$29,952+$235.98+$240=$30,427.98

---P656 powder supply

Present:

Lead time:14 days

Weekly demand=120 units/week

Annual demand=120 units/week x 52 weeks=6240 units

Unit cost=$35/unit;

Order cost=$2/order;

Lot size/order=350 units/order

Holding cost/unit=Unit cost x 23%=$35x23%=$8.05/unit

Total material cost= Annual demand x unit cost=6240 unitsx$35/unit=$218,400

Total holding cost=Average Inventory( Lot size/2)x Holding cost/unit=$1408.75

Total ordering cost= (Annual demand/ Lot size)x...