Ergonomics Inc. 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
Assume there is no uncertainty at all about the demand or the lead
time.
a. Calculate EOQ if unit cost is $65 and $63.
(Note: These EOQs do not need to be feasible in their price range.)
(Round up your answers to
the next whole number.)
b. Calculate annual ordering costs for each
alternative? (Round your
answers to 2 decimal places.)
c. Calculate annual inventory carrying costs for
each alternative? (Round
your answers to 2 decimal places.)
d. Calculate annual product costs for each
alternative?
e. What will be the total costs for each
alternative? (Round your
answers to 2 decimal places.)
f. Based on your analysis, how many chairs should
they order at a time? (Round your answers to 2 decimal
places.)
g. How much the firm can save annually by using
the order quantity in Part f. instead of the first EOQ shown in
Part a? (Round your
answer to 2 decimal places.)
