Reorder Point $($ROP$)$

ROP $=D$ LT $($lead time$)$

Total Cost

TAC only calculates inventory holding cost and ordering$/$setup cost$.$ TAC does to include the

cost of goods sold $($COGS$).$

Total Cost $($year$)=$ TAC $+$ COGS

Total Cost $($year$)=$ TAC $+RV$

Putting it all Together $($considering that storage cost $($S$)S=VW$$ $/$unit$/$year$)$

TAC$=\frac{QVW}{2}+\frac{AR}{Q}$

$Q=\sqrt[\phantom{2}]{\frac{2RA}{VW}}$

TAC$=\frac{Q}{2}+\frac{AR}{Q}$

$Q=\sqrt[\phantom{2}]{\frac{2RA}{S}}$

ROP$=DLT$

Total Cost $(year)=$ TAC $+RV,$ Total Cost $(year)=$ TAC $+$ COGS

Problem $1($EOQ and TAC$)$:

Annual Demand $=60,000$

Ordering cost $=$$$25$ per order

Holding cost $=$$$3$ per item per year

No$.$ of working days per year $=240$

Calculate:

Q $($EOQ$)$

TAC $($Total Annual Cost$)$

Number of Orders Per Year

Daily Demand

Time between orders

Reorder point if lead time $=3$ days $($lead time $$ time between orders$)$