Ergonomics Inc. sells ergonomically designed office chairs. Thecompany has the following information:
Average demand = 35 units per day
Average lead time = 49 days
Item unit cost = $69 for orders of less than 390 units
Item unit cost = $65 for orders of 390 units or more
Ordering cost = $44
Inventory carrying cost = 20%
The business year is 250 days
Assume there is no uncertainty at all about the demand or thelead time.
a. Calculate EOQ if unit cost is $69 and $65.(Note: These EOQs do not need to be feasible in their price range.)(Round up your answers to the next wholenumber.)
b. Calculate annual ordering costs for eachalternative? (Round your answers to 2 decimalplaces.)
c. Calculate annual inventory carrying costsfor each alternative? (Round your answers to 2 decimalplaces.)
d. Calculate annual product costs for eachalternative?
e. What will be the total costs for eachalternative? (Round your answers to 2 decimalplaces.)
f. Based on your analysis, how many chairsshould they order at a time? (Round your answers to 2decimal places.)
g. How much the firm can save annually by usingthe order quantity in Part f. instead of the first EOQ shown inPart a? (Round your answer to 2 decimalplaces.)
