## EOQ Assignment

20 Feb

EOQ Assignment

You are the company’s Supply Chain Manager — solve the below questions to ensure an optimal ordering policy.

Annual requirements (R)  =    16,242     units        Place EOQ graph here….
Order cost (S) =    \$68.00     per order
Holding rate (k) =    28.0%    annually
Unit cost (C) =     \$52.87     per unit
Lead time (LT) =    4    days
Number of days per year =    365    days

Compute the following:
Note:  You must include formulas for full credit — do NOT simply type in answers.  Add additional cells if necessary, but label each clearly!
a) EOQ =        units
EOQ (rounded to nearest whole item)        units
b) total purchase cost =
c) annual holding cost =
d) annual order cost =
e) total annual logistics cost =        (without purchase cost)
f) reorder point        units  (note: no variability in demand or lead-time in this situation)
g) number of orders placed per year =        orders
h) time between orders =         days
i) plot cost curves — holding cost, order cost and total cost.  Use the layout below the questions, if needed.
j)  If you are required to order by the whole case, at 20-per case, what Q would you recommend?        units
k)  What is the new Total Annual Logistics Cost of the Whole-Case Q?        (suggestion — you can compute here, or just change your Q above where your EOQ is and see the resulting costs — don’t forget to undo this change to put EOQ back!)
l) What is the difference in Total Annual Logistics Cost of EOQ and that of the Whole-Case Q?
n) Your CEO just announced that inventory levels must be cut by 10% in order to reduce costs (based on original EOQ).  What would your new Q need to be?        units
o) Based on your new Q from above, you will actually raising costs unless you can change S too. What would your new S need to be?
p) How much must S be reduced from the current cost-per order to reach your new goal?
q)  List 3 specific ways in which you can lower S in order to reach your  goal?    1)
2)
3)

Q    Annual Holding Cost    Annual Ordering Cost    Total Cost
50
75
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125
150
175
200
225
250
275
300
325
350
375
400
425
450
475
500
525
550
575
600
625
650
675
700
725
750
775
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825
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875
900