Question

In: Finance

Find the EOQ, the total annual cost associated with the economic order quantity, the reorder point,...

Find the EOQ, the total annual cost associated with the economic order quantity, the reorder point, number of orders per year and the time between orders.

Annual Demand	15,600 units
Weeks Operating	52 weeks/year
Set up Cost	$60/order
Holding rate	20%
Unit cost	$80 /unit
Lead-Time	5 weeks

Expert Solution

ffcc cnANS. 1. Economic order quantity= Square root[(2*Annual demand* cost per unit)/ Carrying cost]

= Square root[(2* 15,600*80)/ 100*20%)]

= Square root 124,800

= 353.27 units

2. Total annnual cost= Purchase cost+ order cost+ holding cost

= 80+60+20

= 160

3. Reorder point= daily demand* lead time + safety stock

Daily demand= 15600/364= 42.85

=42.85*35= 1500

4. Time between orders = no. of working days per year/number of orders

= 364/60= 6 days

5. No. of orders per year = Annual demand/EOQ

= 15600/353.27

= 44.15

jeff jeffy answered 2 years ago

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