Answer Happy

Alpha Corp. (a) is a company producing lawn mower. Beta Corp. (b) is a company producing motor for the lawn mower. Recently b is in negotiation with a for the supply of motor for the year 2023. After the negotiation, b realise that there is a great need for it to forecast a 's future demand for the year 2023. Therefore, b uses a 's quarterly demand over the past four years (2019-2022) to forecast a 's future demand for the year 2023. Table I show a 's quarterly demand over the past four years (2019-2022). C B D 1 Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 2 465 476 595 422 501 540 485 542 517 550 2019 2020 2021 2022 571 466 581 599 492 528 QUESTION: a is planning a budget to purchase the motors from b in 2023. Currently a is purchasing the motors quarterly. But, now they have decided to apply EOQ model instead of purchasing quarterly. Assume that a is now experiencing regular demand from the customer, the ordering cost is RM50 per order, the unit cost is RM320 per motor, and annual holding cost are 20% of the unit cost. a also has 250 working days per year and a lead time of 5 days. Based on the result from Q2) identify the following aspects of the inventory policy for the motors: a) Economic order quantity (EOQ) b) Reorder point c) Cycle time d) Total annual inventory cost e) If a want to choose between quarterly and EOQ, which purchasing practice would you recommend to it. Justify your selection