Company A is a car manufacturer. In 2020, a total of 9559 cars were sold....
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Company A is a car manufacturer. In 2020, a total of 9559 cars were sold. For the 12-month period starting January 2020 and ending December 2020, the detailed sales number are as follows: January:636 February:823 March:499 April:189 May:420 June:441 July:672 August:587 September: 647 October:1566 November:1280 December:1789
1. Assume each car is equipped with 4 tires (1 set), and each tire costs $200. It costs the company $500 to place an order (clerical costs). The company orders 1000 sets of tires per order. The annual holding cost is 40% of each tire's value. Determine all of the relevant costs for the current order quantity (denoted as COQ). Then, calculate the economic order quantity (denoted as EOQ) and the number of orders the company will place per year. Use these values to calculate the total cost using the EOQ. Compare each of the cost components using the EOQ with COQ. Which order quantity should the company use? Use the 2020 demand observation to estimate the annual demand.
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