insearch economic order quantity

# insearch economic order quantity - =(2.191*5(2.191*10 =33...

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Alexis Company uses 800 units of a product per year on a continous basis. The product has a fixed cost of \$50 per order, and its carrying cost is \$2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ b. Determine the average level of inventory (Note: use a 365 day year to calculate daily usage) c. Determine the reorder point d. Indicate which of the following variables change if the firm does not hold the safety stock & Explain: 1) order cost 2) carrying cost 3) total inventory cost 4) reorder point 5) economic order quantity a. Calculate the EOQ eoq=√2*ordering cost*annual demand/annual holding cost per unit =√2*50*800/2 =200 units b. Determine the average level of inventory (Note: use a 365 day year to calculate daily usage) =EOQ/2+buffer inventory =200/2+(2.19*10) =100+22 =122 units c. Determine the reorder point Reorder point= Normal consumption during lead-time + Safety Stock .

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Unformatted text preview: =(2.191*5) + (2.191*10) =33 units(approximately) There are total of 800 units which will be ordered through out the year 800/200 Which means there will be 4 orders =365/4 After every =91.25 days stock will be ordered =200/91.25 2.19 d. Indicate which of the following variables change if the firm does not hold the safety stock & Explain: 1) order cost 2) carrying cost 3) total inventory cost 4) reorder point 5) economic order quantity if company does not hold safety inventory it will increase order cost as when they need it they will order them and this will increase the ordering cost annually carrying cost will decrease if safety stocks are not kept as they will take some place and the company have to pay the insurance and the rent of the place where they are keeping it. Total inventory cost will be lower if the safety stock is not kept Reoreder point will be decreased. There will be no effect on EOQ....
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insearch economic order quantity - =(2.191*5(2.191*10 =33...

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