Question

In: Statistics and Probability

Consider a basic economic order quantity (EOQ) model with the following characteristics: Item cost: $15 Item...

Consider a basic economic order quantity (EOQ) model with the
following characteristics:

Item cost:			$15
Item selling price:			$20
Monthly demand:			500 units (constant)
Annual holding cost:			$1.35 per unit
Cost per order:			$18
Order lead time:			5 working days
Firm's work year:			300 days (50 weeks @ 6 days per week)
Safety stock:			15% of monthly demand

For this problem, determine the values of:

Q* the optimal order quantity and reorder point.

Select one:

a. 400 and 100

b. 400 and 75

c. none of the other

d. 500 and 175

e. 400 and 175

Expert Solution

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AS FOR GIVEN DATA....

Consider a basic economic order quantity (EOQ) model with the
following characteristics:

Item cost:			$15
Item selling price:			$20
Monthly demand:			500 units (constant)
Annual holding cost:			$1.35 per unit
Cost per order:			$18
Order lead time:			5 working days
Firm's work year:			300 days (50 weeks @ 6 days per week)
Safety stock:			15% of monthly demand

For this problem, determine the values of:

Q* the optimal order quantity and reorder point.

SOLUTION ::-

Answer 1

E) 400 and 175

Explanation: EOQ = √ [(2*500*12*18)/1.35]

= 400 units

Re-order point = Safety stock + Normal consumption * Normal time

= (500*15%) + 20 * 5

= 175 units

I HOPE YOU UNDERSTAND...

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THANK YOU...!!

orchestra answered 2 years ago

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