Northcutt Bikes purchases two types of wheels for their road-racing bikes: a regular version and a deluxe version.

QUESTION:

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Northcutt Bikes purchases two types of wheels for their road-racing bikes: a regular version and a deluxe version. The table below has demand information for the past year for each style of wheel, as well as combined figures.

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a. Calculate the EOQ for each wheel type.

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b. Calculate the ROP for each wheel type.

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c. For each wheel type, calculate the total yearly holding and ordering cost, as well as the total item cost.

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Monthly

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Other important information:

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Yearly holding cost 20% of item cost

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Ordering cost $200 per order

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Service level 95%

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Lead time 0.5 months

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Item costs

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Deluxe Wheels $40 each

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Regular Wheels $35 each

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