Question

"Weekly demand for a product is 258 units with a standard deviation of 75 units. The cost of placing an order is 75, and the time from ordering to receipt is 3 weeks. The procurement cost (wholesale price) of the product is $10. The annual inventory carrying cost is 10% of the procurement cost of the product. What is the EOQ for this product?"

Answer 1

Answer:

The EOQ is 516 Units

Explanation:

Solution

Given that:

The product demand weekly is = 258 units

Standard deviation = 75 units

The cost of ordering  is = 75

The time from receipt ordering =  3 weeks

The cost of procurement is = $10

The annual inventory cost (carrying ) is = 10%

Now,

The expected demand is =  lead time demand * the lead time demand in weeks

= 258 units * 2 weeks = 516 Units