Italia Aerospace Industries (IAI) produces parts for Boeing and Airbus. One of their most important parts is the stringer-a critical part of a commercial aircraft's fuselage. In order to produce these stringers, IAI needs fasteners, which they purchase in huge quantities from a Japanese firm. Italia Aerospace Industries will require 200,000 fasteners for next year. The cost of placing an order is $2,000 because of legal requirements. The unit cost of a fastener is $26. The holding cost for IAI is 13.5% of purchasing price. How many times per year would IAI have to place an order? (Round to two decimal places.)

Question

Business

Cello

17 December, 16:27

Italia Aerospace Industries (IAI) produces parts for Boeing and Airbus. One of their most important parts is the stringer-a critical part of a commercial aircraft's fuselage. In order to produce these stringers, IAI needs fasteners, which they purchase in huge quantities from a Japanese firm. Italia Aerospace Industries will require 200,000 fasteners for next year. The cost of placing an order is $2,000 because of legal requirements. The unit cost of a fastener is $26. The holding cost for IAI is 13.5% of purchasing price. How many times per year would IAI have to place an order? (Round to two decimal places.)

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Answers (1)

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Regan Brock · Answer 1

Number of order = 13.2 times

Explanation:

The economic order quantity is the order quantity that minimizes the total of ordering costs and holding costs.

EOQ is computed thus:

EOQ = √ (2 * Co * D) / Ch

Co ordering cost - 2000,

Ch - holding cost - 13.5% * 26 =

A - annual demand - 200,000

EOQ = √ (2 * 2000 * 200,000) / (13.5% * 26)

= 15,097.02712

The number of times IAI would place order

= Annual demand? order quantity

= 200,000/15,097.02

= 13.2 times