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Calculating EOQ, safety stock and inventory costs

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Given the following information, determine an inventory management system for an item in demand 50 weeks/year.
Item Cost $10
Order Cost $250
Annual Holding Cost $3.33/unit
Annual Demand 25,750
Weekly demand 515
Std Dev of Demand 25/week
Lead Time 1 week
Std Dev of Lead Time 0.1 week
Service Level 95%

a. State the order quantity and re-order point
b. Determine the annual holding and order costs
c. If a price break of $50/order was offered for orders over 2000 units, should you plan on 2000 unit orders?

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Solution Summary

Solution depicts the methodology to find EOQ, safety stock and inventory costs in the given case.

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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