Inventory: EOQ and ROP

Nantahala Brewing bottles approximately 60,000 six-packs of Trail Extra Pale Ale per year. The bottles are ordered from a supplier. Nantahala’s operations work 240 days a year. It costs $3 to keep one pack of bottles in inventory for one year and it costs $25 to place an order. The supplier is very accommodating and will allow any size order. The supplier’s lead time is 10 days. Nantahala currently orders 2,400 packs of bottles at a time.

1.What is the total annual cost of the current policy? What is the total annual cost of ordering 2400 packs at a time?
2.How often will Nantahala place an order for bottles under the current inventory policy?
3.What is the EOQ?
4.How often will Nantahala place an order for bottles if they change the order quantity to the EOQ?
5.What is the total annual cost if they change the order quantity to the EOQ?
6.How much money will Nantahala save by changing to the EOQ?
7.How often will Nantahala place an order for bottles if they change the order quantity to the EOQ?
8.What is the reorder point for Nantahala?
9.If the supplier can change the lead time to 5 days, what would the new reorder point be?

Sample Solution

ACED ESSAYS