Question

1. The demand for product M2 at Jana Company is 600 KG per week. The setup cost for placing an order to replenish inventory is $25. The order is delivered by the supplier which charges $0.10/KG for the cost of transportation. This transportation cost increases the cost of M2 to $1.25/KG. M2 loses its freshness while stored at the Jana Company warehouses. To account for this, the Jana Company charges an annual holding cost of $2.6/KG.

Required: Determine how often Jana Company should order for M2 and what size each order should be. (85 works)

Answer 1

Economic Order Quantity(EOQ)= Square root of [(2 X Annual Demand X Ordering cost per order)/carrying cost]
	Annual demand(kg)	a	31,200.00	(600 kg*52 week)
	Ordering cost per order	b	$          25.00
	Carrying cost of inventory	c	$          26.00
		d=[(2*a*b)/c]	60,000.00	kg
	EOQ	e=square root of d	245	kg
	Annual demand(kg)	31,200
	Order quantity	245
	No. of order	127
	Jana company sholud order 127 times in a year with a order quantity of 245Kg per order