ZEF manufactures fridge for the commercial market. One of the crucial parts required for the assembly of this product is part ‘A’. Requirement for part ‘A’ is 277 units per month at RM 84 per unit and the handling cost is 25% from the unit price. The cost for preparing the order is RM19.00. Assume that the company operates on a 288 working days per year. a) Compute the economic order quantity.
(2 marks)
b) How many orders should be placed each year?
(2 marks)
c) What is the reorder point if the part requires 3 days to arrive at the factory?
(2 marks)
d) Draw a picture that illustrates an inventory cycle with suitable details.