Demand for Deskpro PC at SuperPC is 1000 units per month fix

Demand for Deskpro PC at SuperPC is 1000 units per month, fixed shipping cost for each order placement is $4000. Each Deskpro costs SuperPC $500 to purchase from its supplier, and the holding cost is 20% of the unit cost.

1)How many computers should SuperPC order each time?

2)What is the cycle inventory?

3)What is the number of orders per year?

4)Annual ordering and holding cost?

5)Average flow time?

Solution

Demand

1000

per month

D

Annual Demand

12000

S

Order cost

4000

C

Cost per unit

500

H

Holding cost

100

=0.2*500

1

EOQ=sqrt(2*D*S/H)

$        979.80

2

Cycle inventory=EOQ/2

$        489.90

3

No. of orders=D/EOQ

13.00

=ROUNDUP(C3/C9,0)

4

Annual ordering cost= No of orders*S

$ 52,000.00

Holding Cost=Avg inventory*H

$ 48,989.79