Homework Answers
Monthly demand= 120 cases
Annual demand, D= 120*12 =1440 cases
Annual carrying cost per case, H= $6
Ordering cost, S= $18
Lead time = 3 days
Number of working days in a year= 365
a. EOQ= √(2DS/H) = √(2*1440*18/6) = 92.95 cases
b. Number of times the department should order in a year based on EOQ= D/Q
= 1440/92.95 = 15.49
c. Length of the order cycle= Total working days/number of orders in a year
= 365/15.49 = 23.56
d. Reorder point, ROP= daily demand*lead time in days
= (1440/365)*3 =11.84 cases
e. Total inventory cost= (D/Q)S+ (Q/2)H = (1440/92.95)*18+ (92.95/2)*6 = $557.71
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