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Calculating EOQ and Reorder point

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Southeastern Bell stocks a certain switch box at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern estimates its annual holding costs for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year and the lead-time to receive an order from the supplier is 8 working days.

(a) Find the economic order quantity.
(b) Find the annual holding costs.
(c) Find the annual ordering costs.
(d) What is the reorder point?

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Solution Summary

Solution describes the steps for calculation economic order quantity, annual holding costs, annual ordering costs and reorder point for Southeastern Bell.

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Please refer attached file for better clarity of formulas.

Solution:
(a) Find the economic order quantity.
Annual Demand=D=15000 units
Annual Holding cost=Ch=25 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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