Petromax Enterprises uses a continuous review inventory control system for one o
ID: 369714 • Letter: P
Question
Petromax Enterprises uses a continuous review inventory control system for one of its SKUs. The following information is available on the item. The firm operates 52 weeks in a year. Refer to the standard normal table for z-values. Demand = 91,000 units/year Ordering cost = $32.50/order Holding cost = $2.50/unit/year Average lead time = 1 week Standard deviation of weekly demand = 200 units a. The economic order quantity for this item isunits. (Enter your response rounded to the nearest whole number.)Explanation / Answer
a.
Demand, D
91,000
units/yr
Ordering Cost, Co
$ 32.50
per order
Holding Cost, Cc
$ 2.50
per unit per yr
Avg. Lead Time, L
1
week
No Of Week In A Year
52
weeks/yr
Std Dev Of Weekly Demand
200
units
For A Continuous Review Model,
EOQ=sqrt(2*Co*D/Cc)
EOQ = sqrt(2*32.50*91000/2.50)=
3845
units
Demand, D
91,000
units/yr
Ordering Cost, Co
$ 32.50
per order
Holding Cost, Cc
$ 2.50
per unit per yr
Avg. Lead Time, L
1
week
No Of Week In A Year
52
weeks/yr
Std Dev Of Weekly Demand
200
units
For A Continuous Review Model,
EOQ=sqrt(2*Co*D/Cc)
EOQ = sqrt(2*32.50*91000/2.50)=
3845
units
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