Annual Demand, D = 10000 boxes Cost, C = $ 4 / box Carrying cost, H = 4*0.33 = $
ID: 372862 • Letter: A
Question
Annual Demand, D = 10000 boxes
Cost, C = $ 4 / box
Carrying cost, H = 4*0.33 = $ 1.33
Cost of ordering, S = $ 150 /order
Lead time, L = 10 days
How much to order, EOQ = (2DS/H) = (2*10000*150/1.33) = 1502 boxes
When to Order is Reorder point, ROP = Daily demand * Lead time = (10000/365)*10 = 274 boxes (considering 365 days in a year)
Abby should order 1502 boxes when the inventory level is 274 boxes or lesser.
Service level and increment is not provided in the question, also standard deviation of demand is not given. So there is no safety stock.
Explanation / Answer
Hospital purchasing agent Abby Smith needs to order examination gloves for the hospital. Currently, she orders 1,000 boxes of gloves whenever she thinks there is a need. Abby has heard that there is a better way to make this purchase and wants to use economic order quantity (EOQ) to determine how much to order and when to order. She collects the following information
Cost of the gloves: $4.00/box
Carrying costs: 33% or $1.33/box
Cost of ordering: $150/order
Lead time: 10 days
Annual demand: 10,000 boxes/year
HCM403_Inventory Template Saved Insert Draw Page Layout Formulas Data Review View Tell me what you want to do Share Cut Copy Fonmat Painter 2AutoSumA 1 s-% , 158£2 Paste Conditional Format as Cel Insert Delete Format Formatting TableStyles Sort& Find & Filter Select Blu-1.15-A- Merge & Center -- - Clear Clipboard Font Alignment Number Cells Editing Service L... A Reorder Point (ROP) with FOO Ordering B 1 Reorder Point Average daily demand 7 Average lead time 8 Std dev demand during lead time 9 Service level 10 Increment 11 Stock out risk 12 z associated with service level 13 Average demand during lead tim 14 Safety stock 15 Reorder point 16 17 18 19 d27.4 units L10 days aL1000 units ASL #NUM! SS=1 ROP=| #NUM! #NUM! 274 units units units -4000.0-3000.0 -2000.0-1000.0 0.0 1000.0 2000.0 3000.0 4000.0 Daliy Demand -daily demand ROP Instructions Basic EOQ | Reorder Point-No safety stock | Reorder Point With Safety Stock Ready + 100% Type here to searchRelated Questions
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