Ergonomics Inc. sells ergonomically designed office chairs. Thecompany has the following information: Average demand = 30 unitsper day Average lead time = 37 days Item unit cost = $57 for ordersof less than 270 units Item unit cost = $56 for orders of 270 unitsor more Ordering cost = $32 Inventory carrying cost = 20% Thebusiness year is 250 days Assume there is no uncertainty at allabout the demand or the lead time.
a. Calculate EOQ if unit cost is $57 and $56. (Note: These EOQsdo not need to be feasible in their price range.)
b. Calculate annual ordering costs for eachalternative?
c. Calculate annual inventory carrying costsfor each alternative?
d. Calculate annual product costs for eachalternative?
e. What will be the total costs for each alternative?(Round your answers to 2 decimal places.)
f. Based on your analysis, how many chairsshould they order at a time?
g. How much the firm can save annually by usingthe order quantity in Part f. instead of the first EOQ shown inPart a?
