Question 13.2: A local distributor a national tire company expects to sell ...

Operations Management [EXP-72231]

A local distributor a national tire company expects to sell approximately 9,600 steel-belted radial tires of a certain size and tread design next year. Annual carrying cost is $16 per tire, and ordering cost is $75. The distributor operates 288 days a year.

a. What is the EOQ?

b. How many times per year does the store reorder?

c. What is the length of an order cycle?

d. What is the total annual cost if the EOQ quantity is ordered?

Question Data is a breakdown of the data given in the question above.

Number of steel-belted radial tires expected to be sold next year: 9,600
Annual carrying cost per tire: $16
Ordering cost: $75
Number of days the distributor operates per year: 288

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Step 1:

Calculate the economic order quantity (EOQ) using the f...

Step 2:

Calculate the number of orders per year using the formu...

Step 3:

Calculate the length of the order cycle using the formu...

Step 4:

Calculate the total cost (TC) using the formula TC = (Q...

Step 5:

Note that the ordering and carrying costs are equal at ...

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