Prepare your own sample problems and solutions for the economic order quantity (Total Annual Cost, Reorder Point).

Formula:

R = dl R = reorder point d = average daily demand L = lead time in days Example : REORDER If average daily demand is 40 units and lead POINT time is five days, then the reorder point =(40 units x 5 days) = 200 *When the inventory reaches 200, it is time to place an order. ECONOMIC ORDER QUANTITY Total Cost TC = total annual cost TC - (85) + (9#) D = annual demand Q = quantity to be ordered H =annual holding cost S= ordering or setup cost Economic Order 2DS EOQ Quantity @VH MODEL D = annual demand Q = Optimal order quantity H =annual holding cost 5= ordering or setup costECONOMIC ORDER QUANTITY Example : Suppose annual demand for motherboards at Palm Pilot, the handheld-computer company, is 10,000 units and it currently orders 500 motherboards each time. The number of orders placed per year is 20 (10,000/500). If the cost to place an order is Php 75, then the annual ordering cost is Php 1500 (20 orders Php 75 ordering cost). The holding cost is Php 6 per unit per year, and the annual holding cost is Php 1500 (500 units/2 x Php 6 EOQ per unit). The company operates 250 days per year. And Lead time MODEL is 5 days . Compute for the total annual cost of basic EOQ model . Compute for the re-order point. Compute for the EOQ. ECONOMIC ORDER QUANTITY Compute for the EOQ. 2DS 2 ( 10 000) (75) EOQ MODEL 250, 0000 = 500 units D = annual demand Q = Optimal order quantity H =annual holding cost 5= ordering or setup cost ECONOMIC ORDER QUANTITY Compute for the total annual cost of basic EOQ model . TC- (85) + (9#) = (10,000/500*75 ) + (500/2*6) =1,500 + 1,500 =Php 3.000 EOQ MODEL Compute for the re-order point . R = di = 40*5 =200 units