Calculate the EOQ
An agent supplies 1000 units per calendar month (PCM) OF A PRODUCT TO CONSUMER. The cost per unit is £175 and the amount cost of storage space is £40. Associated cost with Ordering/Re-ordering is £35 per order and interest rates are constant at 12.5% per year.
1. Calculate the annual holding cost of one unit
2. Calculate the EOQ.
3. Calculate the annual number of re-orders necessary to satisfy the EOQ.
4. Draw a graph containing total cost, holding cost and re-ordering cost against order quantity and comment upon it. Use an order quantity range from 1 to 40 on your horizontal axis
5. Suppose now the EOQ was 3 unit less than your calculate EOQ. Calculate the cost penalty for deviating from the EOQ value by these 3 units.