answer for scenario 1 as described, please. Prepare a fully working excel spread
ID: 325839 • Letter: A
Question
answer for scenario 1 as described, please.
Prepare a fully working excel spreadsheet to account for the following 5 scenarios; Note: All changes in the EOQ variables (R A, V. W) in the scenarios will be based off the the origi number assigned to those variables as done in class and as shown above in the example. R - Annual Demand 35,500 A Order Cost $90 V- Product Cost- $100 w-inventory C/Costs 14% Scenario 1 The annual demand has increased by 100% (or we could also blandly say it doubled!) What is the new EOQ?Explanation / Answer
To be calculated:
New Economic Order Quantity (EOQ)
Given values:
Annual Demand = 35,500
New Annual Demand, R = 35,500 x 2 = 71,000 (as per scenario 1)
Order Cost, A = $90
Product Cost, V = $100
Inventory C/Cost, W = 14% of product price = 14% of $100
Inventory C/Cost, W = $14
Solution:
Economic order quantity (EOQ) is calculated as;
EOQ = SQRT (2*R*A) / (V*W)
where,
R = Annual demand
A = Order cost
V = Product Cost
W = Inventory C/Cost
Putting the given values in the above formula, we get;
EOQ = SQRT (2*R*A) / (V*W)
EOQ = SQRT (2 x 71000 x 90) / (100 x 14)
EOQ = SQRT (9128.5714)
EOQ = 95.54 or 96
The new EOQ after increase in demand = 96 units
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