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Answer:
EOQ = 200 units
Explanation:
We can easily calculate the Economic order quantity by putting values EOQ formula. All you need is the data for calculation.
DATA
Annual demand = 8,000
Ordering cost = $50
Holding cost = $20
EOQ =?
Formula
EOQ =
Where
Co = Ordering cost
D = Demand
Ch = Holding cost
Solution
EOQ =
EOQ =
EOQ = 200 units
Answer:
a.
4,730 units
b.
16 production runs
c.
1 day
Explanation:
a.
Use the following formula to calculate the optimal run size
Optimal run size = Economic production quantity = x
Where
D = Annual Demand = Daily demand x Numbers operating days = 250 x 295 days = 73,750
S = Ordering cost = $65
H = Holding cost = $0.45 per unit
p = Daily production = 5,250 per day
d = daily dmand = 250 per day
Placing values in the formula
Optimal run size = x
Optimal run size = 4,615.79 x 1.0246951 = 4,729.77 = 4,730 units
b.
Numbers of production run = Demand / Optimal run size = 73,750 / 4,730 = 15.5919 production runs = 16 production runs
c.
Length (in days) of a run = Optimal run size / Daiy production = 4,730 / 5,250 = 0.901 days = 0.90 days = 1 days