DQuestion 25 List the two assumptions about the EOQ model which make it unnecess
ID: 379152 • Letter: D
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DQuestion 25 List the two assumptions about the EOQ model which make it unnecessary for the store to hold safety stock. (Note: There are a lot of assumptions of the EOQ, but only two result in zero safety stock needed). HTML Editor questions. Be su by your final answer to receive full credit, Note: For the square root sign, use sQRT(with numbers under square root sign in parantheses following SQRT), Le. SORT(4) A local bike store has an annual demand of 1500 bikes, and is open 300 days each year. Currently the store places 3 orders a year, ordering 500 boxes in each order. However they have hired you, an expert on inventory management, to determine if they can reduce their annual inventory costs by adjusting the number of bikes they order each time they place an order. The approximate cost of each bike is $400. The cost to place an order is $60, regardless of the size of the order. The cost to hold a bike in inventory for an entire year is $40. Lead time is two days. your calculations and put an X 41 Minutes, 35 S Proctoring Support Livechat Phone What are the total annual costs, including ordering and holding cost, given the store's current policy of using anExplanation / Answer
The two assumptions are following
1) Demand is constant, therefore there is no probability of stockout, due to fluctuations in demand and hence no need to carry safety stock
2) Order replenishment time is constant, so there is no risk of delay and stockout and hence no need to carry safety stock.
Total annual cost of current policy of using an order quantity of 500
= Ordering cost + Holding cost
= (1500/500)*60 + (500/2)*40
= $ 10,180
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