Order Point; Economic Order Quantity; Ordering and Carrying Costs

Brooklyn Bat Company

Brooklyn Bat Company, manufacturer of top of the line baseball bats from Northern white ash, predicts that 8,000 billets of lumber will be used during the year. (A billet is the quantity of rough lumber needed to make one bat.) The expected daily usage is 32 billets. The expected lead time is 10 days, and there is a safety stock of 500 billets. The company expects the lumber to cost $4 per billet. It anticipates that it will cost $40 to place each order. The annual carrying cost is $0.25 per billet.

Required:

1. Calculate the order point.

2. Calculate the most economical order quantity (EOQ).

3. Calculate the total cost of ordering and carrying at the EOQ point.