Question

A product has demand of 500 units per month, at a cost of $200 per unit. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the business $30 to place a single order. The EOQ model is appropriate.

a) Determine the highest number of units that should be purchased by the business. b) What is the number of orders to be placed each year for this product? c) Compute the average annual ordering cost d) Compute the average annual carrying cost e) What is the cost minimizing solution for this product each year in total stock administration costs?

Part 2 The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Using the EOQ model, determine the re-order level, minimum inventory level and maximum inventory level for the product.

Answer 1