Submitted by: Submitted by iooiooi
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Words: 2005
Pages: 9
Category: Business and Industry
Date Submitted: 05/06/2012 07:43 AM
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...