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A company use anually 1,000 units for its operation. The ordering cost is $5.00 per order with any number of units required.
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It is considered a holding cost of $1.25 per unit per year. And the supplier send the order in 5 days with a cost per unit of $12.50.
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Compute the economic order quantity for this company and compare the cost considering the actual requirement of 200 units.
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Annual demand(D) =1.000units
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Average daily demand(d) =2,74(1,000/365)
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Ordering cost(S) = $ 5,00 per order
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Holding cost(H) = $ 1,25
per unit per year
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Lead time(L) =5days
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Cost per unit(C) = $ 12,50
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What quantity should be ordered.
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1.- The optimal order quantity is
2.- The reorder point is:
3.- The total annual cost will be
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ROP= dL1.000(5)
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365
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Qopt=89,4427191UnitsROP=14UnitsTC= $ 12.611,80
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Quantity
Total annual Cost
Difference
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10 $ 13.006,25 -$ 394,447
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50 $ 12.631,25 -$ 19,447
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80 $ 12.612,50 -$ 0,697
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89 $ 12.611,80 $ -
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90 $ 12.611,81 -$ 0,002
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100 $ 12.612,50 -$ 0,697
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200 $ 12.650,00 -$ 38,197
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