Assume the demand data given in the spreadsheet is normally distributed. The accounting department estimates the average costs for A, B, and C books to be $5.05, $7.39, and $10.25, respectively, for a single copy. It costs 45% per year, per unit, for annual holding costs. The batch size is 3,500 for an A book, 1,000 for a B book, and 500 for a C book. The administrative cost for ordering a batch of a book has been estimated to be $125. 1.) What is your recommendation for each type of book? Why? 2.) How much safety stock should be held, by type of book? 3.) What is the total cost of your recommendation? 4.) What are the advantages and disadvantages of each option? Calculate the EOQ and reorder point for each of the book types. Lead time for any type of book is 5 weeks.
Assume the demand data given in the spreadsheet Module 5 EOQ Data. xlsxPreview the document is normally distributed. The accounting department estimates the average costs for A, B, and C books to be $5.05, $7.39, and $10.25, respectively, for a single copy. It costs 45% per year, per unit, for annual holding costs. The batch size is 3,500 for an A book, 1,000 for a B book, and 500 for a C book. The administrative cost for ordering a batch of a book has been estimated to be $125.
Week A books B Books C Books
1 525 154 75
2 517 147 151
3 562 134 77
4 455 145 78
5 399.00 108.00 79.00
6 526.00 139.00 80.00
7 584.00 203.00 81.00
8 542.00 154.00 231.00
9 511.00 132.00 82.00
10 602.00 168.00 233.00
11 289.00 177.00 159.00
12 602.00 212.00 84.00
13 355.00 172.00 160.00
14 329.00 154.00 237.00
15 535.00 140.00 87.00
16 571.00 154.00 163.00
17 384.00 147.00 164.00
18 641.00 269.00 90.00
19 382.00 220.00 90.00
20 655.00 253.00 241.00
21 581.00 187.00 92.00
22 435.00 243.00 243.00
23 447.00 232.00 169.00
24 399.00 202.00 95.00
25 367.00 206.00 171.00
26 487.00 273.00 96.00
27 579.00 239.00 172.00
28 545.00 203.00 248.00
29 617.00 219.00 99.00
30 364.00 292.00 249.00
31 582.00 251.00 175.00
32 499.00 289.00 102.00
33 568.00 246.00 102.00
34 486.00 238.00 103.00
35 323.00 286.00 254.00
36 623.00 216.00 180.00