question archive TechYes is a growing business that sells a variety of high tech accessories that work with computers, cell phones, and other mobile devices
TechYes is a growing business that sells a variety of high tech accessories that work with computers, cell phones, and other mobile devices
Subject:Operations ManagementPrice:3.86 Bought11
TechYes is a growing business that sells a variety of high tech accessories that work with computers, cell phones, and other mobile devices. Their highest volume product is a 6-foot USB extension cable. Between online and in-store locations they sell on average 375 of these cables every quarter (i.e., every three months). They pay $21.59 for each box of cables which contains 36 individual cables for sale. Their ordering costs are $7.41. Holding costs are negligible but they do pay 7.47% annually on the money they borrow to make such purchases.
What is the annual demand for cables in terms of boxes of cables? (whole number.)
What is the economic order quantity (EOQ) for individual cables? (whole number.)
Based on the annual demand and this order quantity (computed for the previous question), how many times per year would they place an order? (two decimal places.)
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a) Annual Demand = 1500 cables
b) EOQ = 704 cables
c) Number of orders per year = 2.13
Step-by-step explanation
a) Annual Demand = Quarterly Demand * 4 quarters per year
Annual Demand = 375 * 4
Annual Demand = 1500 cables
b) Annual Unit Holding Cost = 7.47% * Cost per cable
Annual Unit Holding Cost = 7.47% * Cost per box / Number of cables per box
Annual Unit Holding Cost = 7.47% * 21.59 / 36
Annual Unit Holding Cost = $0.0448
EOQ = sqrt(2 * Annual Demand * Ordering Cost / Annual Unit Holding Cost)
EOQ = sqrt(2 * 1500 * 7.41 / 0.0448)
EOQ = 704.42 =~ 704
EOQ = 704 cables
c) Number of orders per year = Annual Demand / EOQ
Number of orders per year = 1500 / 704.42
Number of orders per year = 2.13
