EOQ Practice Problems PDF

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Practice Problems for MGMT 333...

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EOQ Practice Problems 1. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its products at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. What is the optimal ordering quantity? What is the optimal number of orders per year? D = 30000 S = $10 H = $1

√(2 X 30000 X 10 )/ 1

= 775

30000/775 = 38.71 2. Sam's Cat Hotel operates 52 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags. What is the optimal order quantity? How often should Sam place an order? If 1000 is the current order quantity, how much would Sam save yearly by switching to the EOQ? Demand = 90 bags/week Order cost = $54/order Annual holding cost = 27 percent of cost

√(2 X 4680 X 54 )/ 3.16

= 400

4680/400 = 11.7 = 12 orders per year or one per month Q1000 = 3.16(1000/2) + 54(4680/1000) = $1833 Q400 = 3.16(400/2) + 54(4680/400) = $1264 $ 569 savings...