High Tech, Inc. is a virtual store that stocks a variety of calculators in their warehouse. Customer orders are placed; the order is picked and packaged; and then shipped to the customer. A fixed order quantity inventory control system (FQS) helps monitor and control these SKUs. The following information is for one of the calculators that they stock, sell, and ship.
Average demand 12.5 calculators per week
Lead time 3 weeks
Order cost $20/order
Unit cost $8.00
Carrying charge rate 0.15
Number of weeks 52 weeks per year
Current on-hand inventory 35 calculators
Scheduled receipts 20 calculators
Backorders 2 calculators
What is the Economic Order Quantity?
What is the total (combined) annual order and inventory-holding costs for the EOQ?
What is the reorder point?
What is the inventory position?
Suppose High Tech Inc. currently orders 200 calculators. How much can be saved by adopting an EOQ (the quantity in 3a) versus their current Q = 200?