Description
Chapter 6 Assignment
- Complete questions 1, 3, 4, 5 and 6 on pages 227 and 228.
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Explanation & Answer
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Professor’s Name
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Date
Questions 1,3,4,5, & 6
Question 1: The current order quantity for Paul’s Pasta Pin-wheels is 200 boxes. The order
cost is $4 per order, the holding cost is $0.40 per box per year, and the annual demand is
500 boxes per year.
Part A: Calculate the annual holding cost plus the annual ordering cost to get the total annual
cost when using an order quantity of 200.
Holding cost = (Order Quantity in units/2) * Holding cost per unit
Holding cost = (200/2)*0.4 =$ 40
Annual order cost = (Annual demand/Order Quantity)*order cost per order
Annual order cost = (500/200)*4 = $10
The total cost = 40 + 10 = $50
Part B: Calculate the EOQ and the total annual cost for this order quantity.
EOQ = √2𝐷𝑆/𝐻
4
= √2 ∗ 500...