# Calculating EOQ and Reorder point

Inventory Management

(Reorder Point Calculation)

A distributor of large appliances needs to determine the order quantities and

reorder points for the various products it

carries. The following data refer to a

specific refrigerator in its product line:

Cost to place an order- $100

Holding cost- 20 percent of product cost per year

Cost of refrigerator - $500 each

Annual demand- 500 refrigerators

Standard deviation during lead time - 10 refrigerators

Lead time- 7 days

Consider an even daily demand and a 365- year day

a) What is the economic order quantity?

b) If the distributor wants a 97 percent service probability, what reorder

point, R, should be used?

(z=1.90 for 97%)

.

https://brainmass.com/business/business-management/calculating-eoq-reorder-point-625771

#### Solution Preview

a) What is the economic order quantity?

D =Total demand= 500 units per year

S = ordering cost=$100 per order

H = holding costs=20%*500=$100 per ...

#### Solution Summary

The solution depicts the steps to calculate EOQ and reorder point in the given case.