2024 – Knutson Products Inc is involved in the production of airplane parts and has the following inventory carrying and storage costs

2024 – Knutson Products Inc is involved in the production of airplane parts and has the following inventory carrying and storage costs.

Knutson Products, Inc. is involved in the production of airplane parts and has the following inventory, carrying, and storage costs:   

1. Orders must be placed in round lots of 100 units   

Annual unit usafe

2. Annual unit usafe is 250,000. (assume a 50 week year in your calculations)   

3. The carrying cost is 10 percent of the purchase   

Purchase price

4. The purchase price is $10 per unit   

5. The ordering cost is $100 per order 6. The desired safety stock is 5,000 units. (this does not include delivery time stock)   

7. The delivery time is 1 week   

   

Given the following information:   

a. Determine the optimal EOQ Level?   

Orders

b. How many orders will be placed annually?

c. What is the inventory order point?

d. What is the average inventory level?

e. What would happen to the EOQ if annual unit levels doubled?

Carrying costs double

f. If carrying costs double, what would happen to the level of EOQ?

g. if ordering costs double, what will happen to the level of EOQ?

h. If the selling price doubles, what will happen to the EOQ? What’s the elasticity of EOQ with respect to selling price?

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