Answer The Following Question Using The EOQ Formula In Order

Answer The Follow Question Utilizing The Eoq Formula In Order To Answ

The task involves calculating the Economic Order Quantity (EOQ) for the Coast Guard's inventory of Active Matrix Liquid Crystal displays for their HH-60T helicopters, based on data from the US Army fleet. The key data points include the annual demand, per-unit cost, ordering cost, and inventory holding costs. The EOQ formula helps determine the optimal order size that minimizes total inventory costs, which comprise ordering costs and holding costs.

From the historical data from the US Army, the fleet of 204 helicopters replaced 420 displays annually. Using this data, the annual demand (D) for the Coast Guard is determined proportionally, assuming similar usage patterns. The Coast Guard fleet has 41 helicopters, so their annual demand (D) is calculated as follows:

Annual Demand (D): (Number of displays replaced by the US Army / US Army fleet size) × Coast Guard fleet size

D = (420 displays / 204 helicopters) × 41 helicopters ≈ 84.41 displays per year.

Because demand cannot be fractional in practical terms, it is rounded to 84 displays annually. The cost per display is $999, the ordering cost (S) per order is $350, and the annual inventory holding cost rate (h) is 14%, which translates to the holding cost per unit (H) as:

**H = Unit cost × holding cost rate = $999 × 0.14 = $139.86 per unit per year.

Using the EOQ formula:

EOQ = √(2 × D × S / H)

Substituting the known values:

EOQ = √(2 × 84 × 350 / 139.86) ≈ √(58800 / 139.86) ≈ √(420.02) ≈ 20.49

The EOQ is approximately 20 units. Since you cannot order a fraction of a display, the optimal order quantity should be rounded to either 20 or 21. Typically, rounding down to 20 units ensures that the total costs are minimized unless there's a specific reason to prefer a slightly higher order quantity.

To determine the number of times per year the Coast Guard will need to order displays, divide the annual demand by the EOQ:

Number of orders per year = D / EOQ ≈ 84 / 20 ≈ 4.2

Rounding to the nearest whole number indicates that the Coast Guard will place approximately 4 to 5 orders annually to replenish their inventory of displays.

Summary

  • The EOQ for the Coast Guard's Liquid Crystal displays is approximately 20 units per order.
  • The fleet will need to place about 4 to 5 orders per year to meet their demand efficiently.

This calculation ensures that the Coast Guard minimizes their total inventory costs, balancing ordering frequency and holding costs, critical for effective logistics management of sensitive and expensive parts like aircraft displays.

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