Your firm uses a continuous review system and operates 52 weeks per year. One of

Question

Your firm uses a continuous review system and operates 52 weeks per year. One of the SKUs has the following characteristics. Refer to the standard normal table for z-values. Demand (D) = 19,600 units/year Ordering cost (S) = $50.00/order Holding cost (H) = $3.00/unit/year > Lead time (L) 3 week(s) Cycle-service level-90% Demand is normally distributed, with a standard deviation of weekly demand of 98 units >Current on-hand inventory is 1,040 units, with no scheduled receipts and no backorders. The item's economic order quantity isunits. (Enter your response rounded to the nearest whole number.)

Explanation / Answer

Economic order quantity - sqrt(2*D*S/H)

D - Annual Demand

S- Ordering cost

H - Holding cost per unit

EOQ = sqrt(2*19600*50/3) = 808.29 = 808 units

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