EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 11PA
Summary Introduction
Interpretation:
Economic order quantity and reorder point to have a 95% service level along with steps through which the system will be operated.
Concept Introduction:
Economic order quantity sometimes EOQ is nothing but the addition of the additional number of inventory with each order in order to minimize the inventory cost, such as shortage cost, holding cost, and order cost.
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Students have asked these similar questions
A pharmacist is trying to determine the inventory order and stock levels for a particular drug. The following information is available about the drug.
Demand (D)
85 tablets/week
Working weeks per year
52 weeks
Unit holding cost per year (H)
$6
Order cost (S)
$44/order
Standard deviation of weekly demand (sd)
15 tablets
Lead time (L)
2 weeks
Desired cycle service level
95%
If the pharmacist uses the continuous review (Q) system to control the inventory of the drug, what would be the order quantity and reorder point?
If the pharmacist uses the periodic review (P) system to control the inventory of the drug, what would be the review interval and target inventory level? (Hint: Use the EOQ model to derive the review interval P)
Tom Bergman, owner and operator of the Earplug
Superstore, is reviewing the costs associated with the
store's best-selling hearing aid, the BZ15. The data
available to Dr. Bergman concerning this device follow.
Demand = 25 units/week
- Order cost = $3/order
Holding cost = $1.50/unit/year
The Earplug Superstore operates 52 weeks a year.
If Tom decides to order at the economic order quantity,
what is the TBO?
Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 97,200 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. What is the economic ordering quantity? How many orders will be placed during the year? What will the average inventory be? What is the total cost of ordering and carrying inventory?
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