Question
The following basic information is provided and applies to all questions below. Currently, the annual demand for a product is 1000 units, the setup (i.e.,
The following basic information is provided and applies to all questions below. Currently, the annual demand for a product is 1000 units, the setup (i.e., ordering cost) per order is $45, and the holding cost is 80 cents per item per year.
Q1. Calculate the EOQ for the current year using the basic information provided. With other things constant, demand is expected to grow by 15% for each of the next five years. For next year, this means that demand is assumed to be 1000 * 1.15.
Use the SHORTCUT method discussed in class to provide the EOQ for each of the next five years. Label these EOQ(1), EOQ(2),.EOQ(5). For the final year, compute EOQ(5) using the LONG method (by computing the expected demand and substituting in the EOQ formula) and compare to your answer obtained by the SHORTCUT method. Keep at least four places of decimal in your calculations (you can keep 2 places for the calculated EOQ)
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