E. O. Cue, Materials Management Specialist for Cue’s Custom Billiard Balls, periodically needs to place orders for ivory, one of the raw materials used in producing billiard balls. Mr. Cue knows that manufacturing uses ivory at a rate of 50 kilograms each day, and that it costs $ .04 per day to carry a kilogram of ivory in inventory. He also knows that the clerical costs for placing an order for ivory are $100.00 per order, and that the lead time between placing and receiving each order is four days. Assume 250 days in one year.
A. What is Mr. Cue’s economic order quantity (EOQ) for ivory?
B. At what reorder point should Mr. Cue reorder ivory?
C. If Mr. Cue were to order 1000 kilograms (instead of EOQ) of ivory at a time, what would be the length of the cycle between orders?
D. If Mr. Cue were to order 1000 kilograms (instead of EOQ) of ivory at a time, what would be the average level of inventory?
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