Question 3 Consider the following data for an independent demand item maintained

Question

Question 3

Consider the following data for an independent demand item maintained by Vicki Crittenden, the proprietor of a local auto repair shop:

Weekly demand

75 units

Ordering cost

$15/order

Holding cost

$1.25/unit/year

Weeks in a year

50 weeks

If Crittenden uses the EOQ model, how frequently must she place orders for this item?

Select one:

a. Every 2 weeks

b. Every 4 weeks

c. Every week

d. Every 3 weeks

Weekly demand

75 units

Ordering cost

$15/order

Holding cost

$1.25/unit/year

Weeks in a year

50 weeks

Explanation / Answer

The answer is "b. Every 4 weeks"

Weekly demand 75 units Annual Demand (A) 3750 units Ordering cost (O) 15 per order Holding cost (H) 1.25 per unit per year Weeks in a year 50 weeks EOQ = Root of (2*A*O)/H) root of (2*3750*15/1.25 300 units i.e. 300/75 = 4 weeks

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