Problem 12-31
Inventory EOQ Model
Input Data
Demand rate, D 5000
Results
Economic order quantity, Q* 547.72
Maximum inventory 547.72
Average inventory 273.86
3-week option
Let EOQ = Q*
Demand during lead time (DDLT) = 3 x 100 = 300
Order cost = (5000/Q*) x Co = (5000/Q*) x 15
Holding cost = 0.5 x (Q*-DDLT) x Ch = 0.5 x (Q*-300) x 0.5
5-week option
Order cost = (5000/Q*) x Co = (5000/Q*) x 15
Holding cost = 0.5 x (Q*-DDLT) x Ch = 0.5 x (Q*-500) x 0.5
Ordering cost, Co$15.00
Carrying cost, Ch$0.50 (fixed amount)