𝑄^∗ = √((2∗𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡
∗𝐷𝑒𝑚𝑎𝑛𝑑 𝑅𝑎𝑡𝑒)/(𝐻𝑜𝑙𝑑𝑖𝑛𝑔
Setup Cost(D) $ 100.00
𝐶𝑜𝑠𝑡))
Demand Rate K (units/year) 1,600
Item Cost $ 40.00
Holding Cost (H) $ 8.00
EOQ 200.00
Orders per Year 8
Days between Orders 45.625
𝑄^∗ = √((2∗𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡
∗𝐷𝑒𝑚𝑎𝑛𝑑 𝑅𝑎𝑡𝑒)/(𝐻𝑜𝑙𝑑𝑖𝑛𝑔
Setup Cost(D) $ 100.00
𝐶𝑜𝑠𝑡))
Demand Rate K (units/year) 1,600
Item Cost $ 40.00
Holding Cost (H) $ 8.00
EOQ 200.00
Orders per Year 8
Days between Orders 45.625
Lead time 3
Replenishment level 13.15
Setup Cost(D) $ 100.00
Demand Rate K (units/year) 1,600
Item Cost $ 40.00 Quantity Order Cost
Holding Cost (H) $ 8.00 30 $ 5,333.33
EOQ 200.00 60 $ 2,666.67
90 $ 1,777.78
120 $ 1,333.33
150 $ 1,066.67
180 $ 888.89
210 $ 761.90
240 $ 666.67
270 $ 592.59
300 $ 533.33
Holding Cost (Average) Total Cost
$ 120.00 $ 5,453.33
$ 240.00 $ 2,906.67 We should order 210 but our EOQ is 219 ?
$ 360.00 $ 2,137.78 One is for cost reduction and other is for inventory optimization.
$ 480.00 $ 1,813.33
$ 600.00 $ 1,666.67
$ 720.00 $ 1,608.89
$ 840.00 $ 1,601.90
$ 960.00 $ 1,626.67
$ 1,080.00 $ 1,672.59
$ 1,200.00 $ 1,733.33
r EOQ is 219 ?
d other is for inventory optimization.
Discount Level Quantity
Setup Cost $ 100.00 1 0 to 100
Demand (annual) 1,600 2 101 to 300
Holding Cost 20% 3 301 to 900
4 901 and above
𝑸^∗ = √((𝟐∗𝑺𝒆𝒕𝒖𝒑 𝑪𝒐𝒔𝒕 ∗𝑫𝒆𝒎𝒂𝒏𝒅
EOQ1 200
𝑹𝒂𝒕𝒆)/(𝑯𝒐𝒍𝒅𝒊𝒏𝒈 𝑪𝒐𝒔𝒕 ∗𝑷𝒓𝒊𝒄𝒆))
EOQ2 202.030509
EOQ3 205.19567
EOQ4 210.818511
Discount Level Item Price Order Quantity Annual Product Cost Annual Ordering Cost
1 $ 40.00 220 $ 64,000.00 $ 727.27
2 $ 39.20 222 $ 62,720.00 $ 720.72
3 $ 38.00 301 $ 60,800.00 $ 531.56
4 $ 36.00 801 $ 57,600.00 $ 199.75
Discount Discount Price
0 $ 40.00
2% $ 39.20
5% $ 38.00
10% $ 36.00
Annual Holding Cost Total Cost
$ 880.00 $ 65,607.27
$ 870.24 $ 64,310.96
$ 1,143.80 $ 62,475.36
$ 2,883.60 $ 60,683.35
Production Orders
𝑄^∗ = √((2∗𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡 ∗𝐹𝑙𝑜𝑤
Demand (annual) 2,500
𝑅𝑎𝑡𝑒)/(𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 ∗1−(𝐷𝑎𝑖𝑙𝑦
𝑑𝑒𝑚𝑎𝑛𝑑)/(𝐷𝑎𝑖𝑙𝑦 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒)))
Setup Cost $ 150.00
Holding Cost $ 10.00
Daily Production Rate 25
Daily Demand Rate 10
Q* of Production
𝑤
𝑦
𝑡𝑒)))
