EOQ: An item has the following information: Ordering cost/order, S = $100/order

ID: 360020 • Letter: E

Question

EOQ:

An item has the following information:

Ordering cost/order, S = $100/order Annual demand, D = 240,000 units/year

Carrying cost/unit-year, H = $0.40/unit-yr Lead time = 9 days

Assume 300 working days in a year.

Determine:

(1) The EOQ.

(2) The ROP.

(3) Number of orders per year.

(4) Number of days between orders.

(5) Ordering cost per year.

(6) Carrying cost per year.

(7) Total cost per year.

(8) Average inventory.

Inventory turnover.

The price/unit if the carrying cost %/year = 40%.

(11) How much is the % increase in the total cost per year if the ordering quantity is (a) 10% less than EOQ, and (b) 10% more than EOQ.

1) That quantity which when ordered and delived results in the total costs being minimum is called the economic order quanity.

2) ROQ-registered options principal acts between that client making the order the exchange member who executes the order.

EOQ formula Q=wholeroot of 2ds/H

D=Demand=240000 unit

Ordering S=$100/orders

Carrying cost(H)=$0.40/unit

Q=wholeroot of 2*240000*$100/0.40

=wholerood of 480000*100/.40=wholeroot of 1200,000*100

Q=10954451

2) ROp

formula=orderpoint=daily usage*lead time

=300 working days in one yr89 daysOP=2700 days

3) no of order=24000/100=2400

4) total ordering cost=100*2400=240000

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