Professional Documents
Culture Documents
EOQ Problems
EOQ Problems
2DS
H
2DS
=
H
N = D / Q* =
T = Days per year / N =
TC = (D / Q) S + (Q / 2) H =
ROP = dL =
2DS
H 1 d / p
Example: Bernard Callebaut makes peanut clusters. Their forecast for demand is 4,000
units per year, with an average daily demand of 20 units. The production process is
most efficient when 60 units per day are produced. The setup cost is $15, and the
holding cost is $0.25 per unit per year. What is the optimum number of units per order?
Q* =
2DS
=
H 1 d / p
2DS
IP
Example: Chocolate is ordered by the factory from a supplier in Belgium. Normally the
cost for a case of chocolate is $50, but a quantity discount is provided by the
manufacturer, and the cost for quantities of 200 cases or more is $40. Order cost is $25
per order, and the projected annual demand for chocolate is 500 cases of chocolate.
Inventory carrying charge, as a percentage of cost, is 25%. What order quantity will
minimize the inventory cost?
Problem 1
A company makes bicycles. It produces 450 bicycles a month. It buys the tires for bicycles from
a supplier at a cost of $20 per tire. The companys inventory carrying cost is estimated to be 15%
of cost and the ordering is $50 per order.