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Need explanation on the how 375 units are calculated for holding cost. MRP Lot String: EQQ Technique* 13 WEEK 1 2 3 4 5 7

Need explanation on the how 375 units are calculated for holding cost.

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MRP Lot String: EQQ Technique* 13 WEEK 1 2 3 4 5 7 9 10 Gross requirements 35 30 40 10 40 30 30 55 Scheduled receipts Projected on hand 35 35 43 3 26 Net requirements 30 W/ 0 4V 16 Planned order receipts 73- 77 73. 73 Planned order releases 73 73 73. 73 "Holding costs = $ 1unit/week setup out = $100; gross requirements average per week = 27, lead time = 1 weet. For the 10-week planning period: Holding cost = 375 units X $1 = $375 (includes 57 remaining at the end of week 10) Ordering cost = 4 x $100 = $400 Total = $375 + $400 = $775 INSIGHT > EOQ can be a reasonable lot-sizing technique when demand is relatively constant. However, notice that actual holding cost will vary substantially depending on the rate of actual usage. If any stockouts had occurred, these costs too would need to be added to our actual EOQ cost of $775. LEARNING EXERCISE D What is the impact on total cost if holding cost is $2 per period rather than $1? [Answer: The EOQ quantity becomes 52, the theoretical annual total cost becomes $5,404, and the 10-week cost is $1,039 ($5,404 x (10/52).] RELATED PROBLEMS 14.23, 14.25, 14.26b, 14.27c (14.28a is available in MyOMLab)

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