I have the following problem:
A critical piece of operational equipment contains 30 parts of the same type. The equipment operates 24 hours a day and the critical pieces have a predicted failure frequency of 10,000 hours.
If spares are procured as part of an EOQ policy with: cost per unit of $100, cost of preparation and shipping of $25, an estimated cost of managing an item in inventory of 25% of the inventory value, what is the order quantity and annual costs?

I know:
c = item cost per unit = $100
k = fixed cost per order = $25
h = 25% per year

I need to know:
A = annual demand
since I would use the eqn for EOQ:
EOQ = sqrt((2*k*A)/(h*c))

How do I solve for the annual demand so that I can use the equation above to get the order quantity?

Solution Preview

Machine Operates 24 hours per day,

Total days in a year = 365 x 24 = 8760 ...

Solution Summary

This solution shows step-by-step calculations to determine the expected number of parts needed using total days in a year, probability of a failing part and number of parts in the equipment.

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... the inventory holding costs and ordering costs to ... several assumptions that the Economic Order Quantity model uses. ... always true that the inventory gets used at ...

... By Substituting the values in the below formula we get the EOQ,. Q = sqrt( 2DC0 / Ch). ... Economic Ordering Quantity is approximately 149 units per order. ...

... The EOQ formula is SQRT (2 X ordering cost X annual ... these figures in the formula, you will get the EOQ... If the order quantity is 600 and total usage is 72,000 ...

... and it takes you a half-hour to get cash from ...Ordering cost H= Per Unit Holding Cost Q= Quantity Ordered D= Annual ... to equate d(TC)/dQ to 0 in order to minimize ...