NEW NUMBERS
Chris Froome is a purchasing agent for a firm that sellcomponents for high performance bicycles. One of the most popularcomponents is the TDF bicycle frame which has an annual demand of1,750 units. The cost of each frame is $675 and the inventorycarrying cost is estimated to be 18% of the cost of each frame.Chris has made a study of the costs involved in placing an orderfor any of the frames the firm stocks, and he has concluded thatthe average ordering cost of $73 per order. Furthermore, it takesabout one week for an order to arrive from the supplier, and theTDF operates 50 weeks per year.
a) What is the annual ordering cost?
b) What is the annual holding cost?
c) How many orders (on average) would be placed per year?
d) What is the average inventory?
e) What is the reorder point?
f) What is the EOQ?
