Lilly’s Manufacturing(1)

Lilly’s Manufacturing(1) - Questionable...

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Sheet1 Page 1 EOQ = SQRT of (2*Annual Demand*Fixed Cost per order/Holding Cost per unit) EOQ = SQRT of (2*200000*500/.90) = 14907.12 or 14907 Approx How many times will you order? Number of time order is placed = 200000/14907 = 13.42 What would be the total costs for ordering the cases 1, 6, and 12 times per year? Number of timOrder Cost Quantity Per OAverage QuanHolding Cost Total Cost 1 500 200000 100000 90000 90500 6 3000 33333.33 16666.67 15000 18000 12 6000 16666.67 8333.33 7500 13500 What questionable assumptions are being made by the EOQ model?
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Unformatted text preview: Questionable Assumptions are: 1) Ordering Cost remains constant. 2) Demand rate is constant. 3) Lead time is fixed every time an order is placed. 4) Purchase price of product remains constant and no discounts are available. EOQ: Lilly’s Manufacturing needs fastener supplies to manufacture its products. The C company will need about 200,000 cases next year. The cost of storing cases is about $ $500 for a shipment. Determine the EOQ. Sheet1 Page 2 CFO estimates that the $0.90. The ordering cost is...
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This note was uploaded on 09/04/2011 for the course FIN 3030 taught by Professor Houston during the Spring '11 term at Southeaster Oklahoma State University.

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Lilly’s Manufacturing(1) - Questionable...

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