Product is being evaluated for economic order quantity

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Reference no: EM132233822

A particular product is being evaluated for its economic order quantity (EOQ). The total order lead time is one week. The ordering cost is $100, interest rate is 20 percent per year, and capital cost of the product is $50. The demand rate for the product is 5000 units per year.

a) Determine the EOQ value.

b) At what time intervals should the product be reviewed for reorder purposes?

c) What is the number of replenishment orders placed in a year?

e) Determine the total annual inventory cost for the product.

d) Suppose that you have found another company to transport goods at a lower price per shipment. Will your economic order quantity Q* to be larger or smaller than in part (a) if you choose to switch to this new? Why?

Reference no: EM132233822

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