A local lamp stores expects to sell 2000 lamps in the coming year?

Question

It cost the store RM 1.00 in carrying cost for each lamp and RM 10.00 for each order placed?

a) How many orders will be placed each year ?
b) What is the economic order quantity for the lamps ?
c) If the store wants a one-week safety stock and it takes one week to receive an order after it has been placed, what should the inventory level been when a new order is placed ? Assume a 50-week year.

Answer

First calculate the EOQ (b):

b) EOQ = sqrt[(2x2000x10)/1] = 200 units

a) you will place 2000/200 = 10 orders a year

c) your weekly sales are 2000/50 = 40 units per week. therefore, if you want to have all the time a safety stock of 40 units and it takes 1 week to receive a placed order, then you need to have a stock of 80 when you place the order

A local lamp stores expects to sell 2000 lamps in the coming year?

Answers (1)