QUESTION 4

1. Explain the Economic Order Quantity Model (EOQ).

2. Pfizer Company expects to sell 3,600 units of inventory for the coming year.It is estimated that the cost of carrying each unit of inventory per year is RM2, and Perfizer will incur RM25 each time an order is placed. The calculated costs associated with ordering and carrying the inventories for the upcoming period are presented in table below based on order quantity of 50, 150, 300, 450 and 600 units per order.

(Assume that there are 52 weeks in your calculation)

1. Calculate the EOQ.

2. Calculate the Total Carrying Cost (TCC)

3. Calculate the Total Ordering Cost (TOC)

4. Calculate the Total Inventory Cost (TIC)

5. How many orders will be placed annually?

6. What is the Reorder point?

7. Based on order quantity of 50, 150, 300, 450 and 600, plot the graph of the EOQ Model.