Unformatted text preview: tup cost
Q: order quantity
λ: demand rate (units per time)
c: cost per item
h: holding cost (per unit held per time) 6 Properties of the EOQ
* Q= 2 Kλ
h Q iis increasing with both K and λ and decreasing with h.
Q changes as the square root of these quantities
Q is independent of the proportional order cost, c.
(except as it relates to the value of h = Ic)
The Average Annual
Cost Function G(Q)
Cost 7 Example 4.1
Pencils selling at a steady rate of 60/week, costs 2 cents
and sells for 15 cents each. It costs $12 to setup an
order and the holding cost is based on 25% annual
interest rate. Determine the optimal order quantity, time
between orders, yearly holding and setup costs?
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- Spring '14