Allen Enterprises uses a continuous-review inventory control system for one of its most popular computer games. The
Question:
The firm operates 50 weeks in a year.
Demand =12,000 games/year
Ordering cost = $30/order
Holding cost = $38/game/year
Average lead time =9 weeks
Standard deviation of weekly demand = 245 games
a. What is the economic order quantity for this item?
b. If Allen wants to provide a 95-percent cycle-service level, what should be the safety stock and the reorder point?
Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...
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Related Book For 
Supply Chain Focused Manufacturing Planning and Control
ISBN: 978-1133586715
1st edition
Authors: W. C. Benton
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