Joe Henry's machine shop uses 2 comma 500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets:
Annual demand: 2,500
Holding cost per bracket per year: $ 1.50
Order cost per order: $ 18.75
Lead time: 2 days
Working days per year: 250
a) What is the EOQ? (round your response to two decimal places).
b) What is the average inventory if the EOQ is used? (round your response to two decimal places). What would be the annual inventory holding cost? (round your response to two decimal places).
c) Given the EOQ, how many orders will be made annually? (round your response to two decimal places). What would be the annual order cost? (round your response to two decimal places).
d) Given the EOQ, what is the total annual cost of managing (ordering and holding) the inventory? (round your response to two decimal places).
e) What is the time between orders? (round your response to two decimal places).
f) What is the reorder point (ROP)? (round your response to two decimal places).

a) EOQ = square root of [(2* Order Cost per one order * annual demand] / Holding Cost per bracket per year ] = square root of [ 2* 18.75 * 2,500 / 1.5] = 250 brackets.

b) Average inventory = EOQ/2 = 125 brackets; Annual inventory holding cost = 125 x 1.5 = $187.5

c) Orders made annually give EOQ = Annual demand / EOQ = 2,500/250 = 10 orders;

d) Total annual cost of managing (ordering and holding) the inventory = 10 x 18.75 + 187.5 = $375

e) Time between orders = Total annual working days/ orders made per year = 250/10 = 25 days.

f) The reorder point (ROP) = Demand of bracket per working day * lead time = Annual demand * Lead time / total annual working days = 2,500*2/250 = 20 brackets.