Question
In: Economics
A company is using the EOQ model to manage its inventories. Suppose its annual demand doubles,...
A company is using the EOQ model to manage its inventories. Suppose its annual demand doubles, while the ordering cost per order and inventory holding cost per unit per year do not change. What will happen to the EOQ?
Solutions
Expert Solution
EOQ model is the economic order quantity that used to minimise the ordering and holding costs... There are some cost for each unit for holding inventories which is known as holding cost... If a company is using the EOQ model manage to manage their inventories, the annual demand doubles but the holding and ordering costs does not change, EOQ will be greater... This can be explained with the help of EOQ formula ..
In the above example, we can say that if D doubles and costs remain the same, EOQ will be higher compared to initial economic order quantity..Here, initial stage it would be 400 units and now it is 566 units ...
Rahul Sunny answered 8 months agoRelated Solutions
A. AIA Inc. is looking to manage its cash position using the EOQ model. The company...
A. AIA Inc. is looking to manage its cash position using the EOQ
model. The company is consuming cash at the rate of
$5700 per day, and is open for business 365 days
in the year. Each time the firm sells securities to obtain the
cash, it costs them $200. If the interest rate is
2.50%, what is the optimal order amount
according to the EOQ?
B. AIA Inc. is looking to manage its cash position using the EOQ
model....
A. AIA Inc. is looking to manage its cash position using the EOQ model. The company...
A. AIA Inc. is looking to manage its cash position using the EOQ
model. The company is consuming cash at the rate of $5600 per day,
and is open for business 365 days in the year. Each time the firm
sells securities to obtain the cash, it costs them $270. The
interest rate is 2.40%. What are the annual storage
costs associated with the EOQ?
B. AIA Inc. is looking to manage its cash position using the EOQ
model. The...
Using the EOQ model, if a firm's order quantity is 500 units and its annual holding...
Using the EOQ model, if a firm's order quantity is 500 units
and its annual holding cost is greater than its annual setup cost,
then what can we say about the optimal order quantity?
A. Optimal order quantity = 500 units
B. Optimal order quantity < 500 units
C. Optimal order quantity > 500 units
D. Not enough information is given to answer the question
Suppose we have an Economic Order Quantity (EOQ) problem with discounts. A (annual demand)= 10000, k...
Suppose we have an Economic Order Quantity (EOQ) problem with
discounts.
A (annual demand)= 10000, k (order cost)= 10, c1 (item cost)= 8,
h (holding cost)= 0.1
For orders of 2000 or more, the cost is discounted from 8 to
7.3728.
What is the optimal TAC (total annual cost, including order and
holding, and also including the purchase costs)?
Calculate the EOQ for the following items based on the information given. Annual Demand Annual Holding...
Calculate the EOQ for the following items based on the information
given.
Annual Demand
Annual Holding Cost (per unit)
Order Cost
Item #1
30000
$0.75
$25.00
Item #2
15000
$3.15
$30.00
Item #3
55000
$2.50
$20.00
Item #4
80000
$2.00
$40.00
EOQ
Item #1
Item #2
Item #3
Item #4
For the simple EOQ model, show that the average annual inventory carrying charges are equal to...
For the simple EOQ model, show that the average annual inventory
carrying charges are equal to the average annual ordering costs
when Q = Q*
A company examines its inventory policy and considers using an economic order quantity (EOQ) approach. They...
A company examines its inventory policy and considers using an
economic order quantity (EOQ) approach. They have the following
information about their bestselling model of televisions:
Annual demand - 4000 sets
Current order quantity - 80 sets
Carrying cost - $80.00/set/year
Order cost - $200
Lead time - 6 days
Operating days per year - 300 days
a. What is the current total annual cost (TC) at the current
order quantity?
b. What is the economic order quantity (EOQ)?
c....
Suppose that the annual demand for a component is approximately56,000 units. The company orders the...
Suppose that the annual demand for a component is approximately
56,000 units. The company orders the component from a supplier who
has offered the following quantity discount schedule.Order Quantity0-9991,000-1,4991,500-3,4993,500or morePrice Per Unit$33$31$29$27If the company's carrying charge is 25% of the item's price
and the cost per order is $330, determine the order quantity that
would minimize the total related inventory costs for this
component.The company's decision would be to order ____ Units.The total annualized ordering costs for this quantity is____
q1 The continuous review economic order quantity (EOQ) inventory model operates using two model parameters. These...
q1 The continuous review economic order quantity (EOQ) inventory
model operates using two model parameters. These two parameters
are:
Select one:
a.
Q, which represents a fixed order quantity and R, which
represents a variable reorder point quantity of inventory.
b.
Q, which represents a variable order quantity and R, which
represents a fixed reorder point quantity of inventory.
c.
Q, which serves as the amount of inventory that triggers the
release of an order and R, which is the...
2. The following note appeared in the 2018 annual report of Roca Company: Inventories Inventories (in...
2. The following note
appeared in the 2018 annual report of Roca Company:
Inventories
Inventories (in millions) at December 31 consisted of:
2018
2017
Finished goods
$ 1,078.3
$ 926.7
Raw materials and work-in-process
716.2
684.7
Supplies
78.0
65.6
Total (approximates current cost)
$ 1,872.5
$ 1,677.0
Reduction to LIFO cost
–
16.1
$ 1,872.5
$ 1,660.9
Inventories valued at LIFO comprised approximately 44% and 42%
of inventories at December 31, 2018 and 2017,...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- With VMI, members of the supply chain share planning, demand, forecasting, and inventory information.
- Large lots are desirable in supply chain coordination despite increasing holding costs.
- ***Convert the C++ to Python*** #include <iostream> using std::cout; using std::cin; using std::endl; int charClass; char...
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
ADVERTISEMENT