Scenario 9.4
The Mwongola Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year.
-Use the information in Scenario 9.4. How many times per year must Mwongola order the Smooth Shifter when orders are placed using the EOQ quantity?
A) less than or equal to 10 times per year
B) more than 10 times but fewer than or equal to 20 times per year
C) more than 20 times but fewer than or equal to 30 times per year
D) more than 30 times per year

Question

Quizplus · Accepted Answer

Using the EOQ formula:

EOQ = sqrt((2DS)/H)

where: 
D = annual demand = 300
S = cost to place an order = $40
H = holding cost per assembly per year = $60

EOQ = sqrt((2 x 300 x 40)/60) = 49.14

Therefore, Mwongola should order the Smooth Shifter 49 times per year (rounded up).

To check how many times per year they need to order using the EOQ formula, we can divide the annual demand by the EOQ:

300/49 = 6.12

This means that they need to place orders 6 times a year plus an additional order for the remaining 0.12 of EOQ.

Therefore, Mwongola will need to order the Smooth Shifter more than 10 times but fewer than or equal to 20 times per year (since 6 x 2 = 12 and 6 x 3 = 18).

Scenario 9.4 The Mwongola Company Is a Small Manufacturing Company That Uses