Discount-Mart, a major East Coast retailer, wants to determine the economic orde

Question

Discount-Mart, a major East Coast retailer, wants to determine the economic order quantity for its halogen lamps. It currently buys all halogen lamps from Specialty Lighting Manufacturers, in Atlanta. Annual demand is 2,000 lamps, ordering cost per order is S60, carrying cost per lamp is $12. a) What is the EOQ? 142 lamps per order (round your response to the nearest whole number) b) What are the total annual costs of holding and ordering (managing) this inventory? S(round your response to the nearest whole number).

Explanation / Answer

Solution :

EOQ = Sqrt (2 * Demand * Ordering Cost / Holding Cost)

EOQ = Sqrt (2 * 2000 * 60 / 12) = 141.42 = 142nos

Total Cost of holding and ordering = Holding Cost + Ordering Cost

Total Cost of holding and ordering = Holding Cost * EOQ / 2 + Ordering Cost * Demand / EOQ

Total Cost of holding and ordering = 12 * 142 / 2 + 60 * 2000 / 142 = 1697.07

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