Scenario 9.2
The Burdell 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 9.2.How many times per year must Burdell order the Smooth Shifter when orders are placed using the EOQ quantity?

Question

Quizplus · Accepted Answer

First, we need to calculate the EOQ quantity using the formula:
EOQ = sqrt((2DS)/H)
Where:
D = Annual demand = 300 units 
S = Cost to place an order = $40
H = Holding cost per unit per year = $60
Plugging in the values, we get: 
EOQ = sqrt((2*300*40)/60) ≈ 78 units

Next, we can calculate the number of orders per year by dividing the annual demand by the EOQ:
Number of orders = (Annual demand/EOQ) = 300/78 ≈ 3.85

Since we cannot order fractional units, we need to round up to the nearest integer, which gives us 4 orders per year.

Finally, we can check if this answer is reasonable by calculating the time between orders using the formula:
Time between orders = (EOQ/Days of operation per year)  
= (78/250) ≈ 0.312 days

This means that Burdell needs to order the Smooth Shifter every 0.312 days or approximately every third day. Since we know the annual demand is 300 units, this answer seems reasonable as we would expect to make multiple orders per year. Based on the given choices, the answer is B) more than 10 times but fewer than or equal to 20 times per year.

Scenario 9.2 The Burdell Company Is a Small Manufacturing Company That Uses