EOQ A grocery store replenishes its inventory of cook cookies using EOQ model. d

Question

EOQ

A grocery store replenishes its inventory of cook cookies using EOQ model. demand for the cookie is constant, at 100 packs per week. each pack of cookies cost $20. The annual holding cost is 20% of the cost of purchase. The fixed cost of placing an order is $100. Assume there are 50 weeks a year.

1) EOQ=

Suppose the manager use EOQ as the order size, answer the following questions.

2) The annual holding cost=

3) The total ordering costs per year=

4) The time between two orders= __________weeks

Explanation / Answer

In the question

C= $20

D=100*50 = 5000 packs per year

H=0.20*$20 = $4

Co=$100

EOQ = (2SD/H) = (2*100*5000/4) = 500

Annual Holding cost =( Demand /EOQ)*holding cost =(5000/500)*4=$40

Total Ordering cost =Number of orders per year*ordering cost =(500/2)*100=$25000

Time between two orders = D/Q=5000/500 =10 weeks

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