Economic Order Quantity (EOQ) Calculation for Halogen Bulbs
What is the Economic Order Quantity (EOQ) for the halogen bulbs?
What is the demand during lead time?
What is the reorder point?
Calculation Results:
EOQ: 509
Demand during lead time: 612
Reorder point: 612
Understanding Economic Order Quantity (EOQ) Calculation
The Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity for inventory management. It takes into account the annual demand, cost per order, and holding cost per unit per year.
To calculate the EOQ, we can use the following formula:
EOQ = √((2 * annual demand * cost per order) / holding cost per unit per year)
In this case, the annual demand for halogen bulbs is 10,800, the cost per order is $12, and the holding cost per unit per year is $8. Plugging these values into the formula, we get:
EOQ = √((2 * 10800 * 12) / 8) = √(259200) ≈ 509
Therefore, the EOQ for the halogen bulbs is approximately 509, rounded to the nearest whole number.
The demand during lead time is the quantity of bulbs that will be consumed while waiting for a new order to arrive. In this case, the lead time is 17 days. The daily demand can be calculated by dividing the annual demand by the number of days in a year:
Daily demand = annual demand / number of days in a year = 10800 / 300 = 36 bulbs/day
Therefore, the demand during lead time is 36 bulbs/day * 17 days = 612 bulbs, rounded to the nearest whole number.
The reorder point is the inventory level at which a new order should be placed. It can be calculated by multiplying the daily demand by the lead time:
Reorder point = daily demand * lead time = 36 bulbs/day * 17 days = 612 bulbs
To summarize:
- EOQ: 509
- Demand during lead time: 612
- Reorder point: 612