Determine the economic order quantity, Mechanical Engineering

Determine the economic order quantity:

Determine the economic order quantity and the reorder point. Given

Annual demand (D) = 2,000 units

Average daily demand (d) = 2,000/365

Ordering cost (S) = Rs. 4.2 per order

Holding cost (H) = Rs. 1.75 per unit per year 13

Lead time (L) = 5 days

Cost per unit (C) = Rs. 10.75

What quantity must be ordered?

Solution

The optimal order quantity is

403_Determine the economic order quantity.png

The reorder point is

R = d¯L = (2000 /365) (5) = 27.39 units

The inventory policy is as follows: while the inventory position drops to 28, place an order for 97 more.

The total annual cost will be

TC = DC + (D /Q) S + (Q/ 2) H

= 2000 (10.75) + (2000 /97)  (5) + (97 /2) (1.75)

= Rs. 21687.875

Posted Date: 2/1/2013 6:40:19 AM | Location : United States







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