CASE 8-3
The Acme Filter Company
EOQ Problem Set II
The Acme Filter Company manufactures large industrial air filters. Among the products in their many filter lines is on specifically used by industrial arts departments in high schools, to filter out sawdust in the air.
1. Using the information provided below, find the EOQ and total product costs for these filters.
Annual Demand 770 (000) Carrying Costs 16% Order Costs $4.93 Lead Time 10 days Days/Year 250
2. Assume that in the following year, sales increase by 50,000 units, order costs and unit costs increase by 10% and that carrying costs are reduced to 12%. What is the new EOQ and the percentage change in the order size related costs?
3. Using the monthly demand given below (in 000) for the first year, determine when each order should be placed and what quantity should be ordered? What are the total order costs?
Month
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1 2 3 4 5 6 7 8 9 10 11 12
Demand 105 44 150 68 60 23 30 29 88 112 40 21
4. The second year demand increases by an additional 50,000 units, required in months 3, 4 and 10. This brings the total demand in these months to 180, 78 and 122 respectively. In order to reduce costs determine when each order in the second year should be placed and what quantity should be ordered?
5. Over the last two years, by what amounts have the total order costs increased (or decreased)?