Petromax Enterprises uses a continuous review inventory control system for one of Its SKUs. The following information
Question:
Demand = 50.000 units/year
Ordering cost = $35/order
Holding cost = $2/unit/year
Average lead time 3 weeks
Standard deviation of weekly demand = 125 units
a. What is the economic order quantity for this item?
b. If Perromax wants to provide a 90 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
Operations management processes and supply chain
ISBN: 978-0136065760
9th edition
Authors: Lee J Krajewski, Larry P Ritzman, Manoj K Malhotra
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