Ergonomics Incorporated sells ergonomically designed office chairs. The company has the following information: Average demand = 31 units per day Average lead time = 45 days Item unit cost = $65 for orders of less than 350 units Item unit cost = $63 for orders of 350 units or more Ordering cost = $40 Inventory carrying cost = 20% The business year is 250 days. a. How many chairs should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time. b. What will the firm's average inventory be under each alternative? c. What will be the annual ordering and holding costs for each alternative?

Ergonomics Incorporated sells ergonomically designed office chairs. The company has the following information: Average demand = 31 units per day Average lead time = 45 days Item unit cost = $65 for orders of less than 350 units Item unit cost = $63 for orders of 350 units or more Ordering cost = $40 Inventory carrying cost = 20% The business year is 250 days. a. How many chairs should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time. b. What will the firm's average inventory be under each alternative? c. What will be the annual ordering and holding costs for each alternative?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

es
Ergonomics Incorporated sells ergonomically designed office chairs. The company has the following information:
Average demand = 31 units per day
Average lead time = 45 days
Item unit cost = $65 for orders of less than 350 units
Item unit cost $63 for orders of 350 units or more
Ordering cost = $40
Inventory carrying cost = 20%
The business year is 250 days.
a. How many chairs should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time.
b. What will the firm's average inventory be under each alternative?
c. What will be the annual ordering and holding costs for each alternative?

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