Question

# Exercise 10-1 (from Text 15.24) Economic order quantity The calculation of an Economic Order Quantity uses...

Exercise 10-1 (from Text 15.24) Economic order quantity

The calculation of an Economic Order Quantity uses a formula which balances the cost of ordering stock (PER ORDER which may include research, account handling, supplier meetings and processing time AND if imported, import duties and customs clearance fees etc.) against the UNIT cost of holding inventory (these costs may include warehouse rent, insurance, storage costs etc.). The EOQ is the point where the two costs are equally balanced such that it minimises all costs involved.

1. For each of the following independent cases, use the EOQ equation to calculate the economic order quantity:

 Case A Case B Case C Annual requirement (in units) 7290 4563 150 Incremental cost per order \$500 \$10 \$100 Annual carrying cost per unit \$9 \$15 \$12 Lead time (assume 50 weeks in a year) 4 Weeks 2 Weeks 4 Weeks Safety stock levels required 400 40 12

EOQ = ( 2*7290*500/9)^0.5= 900 ( for a), 78( for b), 50 ( for c)

1. Calculate the Reorder point for all three case with safety stock

Reorder Point = (Average Weekly sale * Lead Time) + Safety Stock

a) Reorder Point = ((7290 units / 50 weeks) * 4 weeks) + 400 units

= (145.8 * 4) + 400

= 583.2 + 400

= 983.2 or 983 units

b) Reorder Point = ((4563 units / 50 weeks) * 2 weeks) + 40 Units

= (91.26 * 2) + 40 units

= 182.52 + 40

= 222.52 or 223 Units

c) Reorder Point = ((150 units / 50 weeks) * 4 weeks) + 12 Units

= (3 * 4) + 12

= 12 + 12

= 24 Units

Note :- (Average Weekly Sales = Annual Requirement / 50 weeks in years)

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.

##### Active Questions
• Consider a non-rotating space station in the shape of a long thin uniform rod of mass...
• Positronium is an exotic form of matter formed by an electron and a positron (a positively...
• In management describes the duties and responsibilities of the administrative levels. Include examples and facts.
• find three instances involving three different types of bias from any source you like (online article,...
• 1. Mention the most important difference or similarities between the following. a.) Stationary Phase in column...
• A ball is thrown vertically upwards with an initial velocity of 10 m/s, from a platform...