Sec uses 60,000 tons of salt over a 50-week working year. It costs 100 to order salt

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Sec uses 60,000 tons of salt over a 50-week working year. It costs £100 to order salt and delivery follows two weeks later. Storage costs for the salt are expected to be £0.10 per ton per year. The current practice is to order twice a year when inventory falls to 10,000 tons (all orders are equal in size). Recommend an ordering policy for Sec using the Economic Order Quantity model and contrast its cost with the cost of the current policy.
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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