Question

The weekly demand is 200 units . The cost to place an order is $2.00, and the time from ordering to receipt is four weeks. The weekly inventory carrying cost is $0.01 per unit. Suppose that the weekly production rate is 500 units. What is the optimal EPQ quantity

Answer 1

Answer:

Optimal EPQ quantity = 2633

Explanation:

Annual demand = D = 200/ week x 52 weeks = 10400 units

Cost to place an order = Co = $2

Weekly inventory carrying cost = I = $0.01

Weekly demand = d = 200 units

Weekly production rate = p = 500

Optimal EPQ quantity = Square root ( 2 x D x C/I x ( p/p-d))

= Square root ( 2 x 10400 x 2/0.01x ( 500 /500 – 200)

= Square root ( 2 x 10400 x 200 x 500/300)

= 2633.12 ( 2633 rounded to nearest whole number )