a) What is the economic order quantity?b) Find the annual holding costs.c) Find the annual ordering costs.d) What is the reorder point? ### Inventory Management Case Study: Southeastern Bell**Context:**Southeastern Bell stocks a specific type of switch connector in its central warehouse to supply its field service offices. Effective management of this inventory is crucial for maintaining operational efficiency and meeting customer demands.**Key Variables:**1. **Annual Demand**: - The yearly demand for the switch connectors is 15,000 units.2. **Holding Cost**: - The estimated annual holding cost for each unit is $24.3. **Order Cost**: - The cost associated with placing and processing an order from the supplier is $73.4. **Operating Days**: - Southeastern Bell operates 300 days a year.5. **Lead Time**: - The lead time to receive an order from the supplier is 3 working days.Understanding these variables allows the company to determine optimal inventory management strategies, such as calculating the Economic Order Quantity (EOQ) and Reorder Point (ROP), which are fundamental in minimizing costs and ensuring continuous supply.**Explanation of Concepts:**- **Economic Order Quantity (EOQ):** EOQ is the ideal order quantity a company should purchase to minimize its inventory costs, such as holding costs, shortage costs, and order costs.- **Reorder Point (ROP):** The ROP is the level of inventory at which a new order should be placed to replenish the stock before it runs out.### Calculation (Hypothetical):To find the EOQ and ROP using the provided data, you can use the following formulas:1. **EOQ Formula:** $ EOQ = \sqrt{\frac{{2DS}}{H}} $ - $ D $ = Annual demand (15,000 units) - $ S $ = Order cost ($73) - $ H $ = Holding cost per unit per year ($24)2. **ROP Formula:** $ ROP = d \times L $ - $ d $ = Demand rate per day $ \left(\frac{{15,000}}{{300}}\right) $ - $ L $ = Lead time in days (3 days)This case study provides data that can be used to understand and apply these inventory management concepts.### Learning Outcomes:- Understand the importance of inventory management in an operational context.- Apply mathematical formulas to determine optimal inventory levels.- Recognize how different variables (d

The goal of the EOQ formula is to identify the optimal number of product units to order. If…

Answered: What is the economic order quantity?

Business

Operations Management

What is the economic order quantity?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

See similar textbooks

Similar questions

Please answer this question. Many thanks!
Discuss the nature of the costs that affect inventory size.
State and explain in brief any five types of inventory on the basis of classification of its types?
What are the 3 major inventory management techniques? Select one company and make on that company data
Write brief notes on purchasing mix and management of Inventory
Enter the formulas in the template. The numeric answers are to the right. Quantity Discount Template (Detailed Documentation) Discount Quantity Min. 1 50 90 125 150 200 Price 1,400 1,100 900 895 890 885 Demand = Carrying cost = Ordering cost = EOQ = Average Inventory Order per year = Total Cost = Quantity Ordered $200.00 $190.00 2,500 Total Cost Order Cost Order Cost (D/Q* Ordering Cost) Carry Cost Carry Cost (Q/2* Carrying Cost) Purchase Cost (D* Price) Quantity Discount Template (Detailed Documentation) Discount Quantity Min. 1 50 90 125 150 200 Price 1,400 1,100 900 895 890 885 Demand = Carrying cost = Ordering cost = EOQ = Average Inventory Order per year = Total Cost = Quantity Ordered 72.5 72.5 90.0 125.0 150.0 200.0 $200.00 $190.00 2,500 72.5 36.3 2.8 $13,784.05 Order Cost $6,892 Total Cost $ 293,784.05 $ 233,784.05 $ 194, 105.56 $ 194,875.00 $ $ 198,500.00 $2,500.00 Order Cost (D/Q* Ordering Cost) $6,892.02 $6,892.02 $5,555.56 $4,000.00 195,583.33 $3,333.33 Carry Cost $6,892…
Define each of the following terms: b. Total carrying cost; total ordering cost; total inventory costs
Who must take part in inventory decisions concerning the expense of ownership? Levels of inventory setting? Quantity of bargain shopping?
What are the different aspects of inventory management?
Explain the different types of inventory, thechallenges of inventory management, and thereasons for the existence of inventory