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Omar

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EOQ Practices
Q1: Suppose you are responsible for ordering inventory. You have the following information.
It costs $5 to hold one widget in inventory for a year
It costs $100 to place an order for widgets, regardless of size
Customers demand 2,500 widgets every year (Sales are distributed evenly throughout the year)

Solution:
= square root of [(2 x 2,500 x 100) / 5]
= square root of (100,000)
= 316.228
E0Q = 316
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Q2: The I-75 Carpet Discount Store in North Georgia stocks carpet in its warehouse and sells it through an adjoining showroom. The store keeps several brands and styles of carpet in stock; however, its biggest seller is Super Shag carpet. The store wants to determine the optimal order size and total inventory cost for this brand of carpet given an estimated annual demand of 10,000 yards of carpet, an annual carrying cost of $0.75 per yard, and an ordering cost of $150. The store would also like to know the number of orders that will be made annually and the time between orders (i.e., the order cycle) given that the store is open every day except Sunday, Thanks giving Day, and Christmas Day (which is not on a Sunday).

SOLUTION:
Cc = $0.75 per yard
Co = $150
D = 10,000 yards

The optimal order size is

The total annual inventory cost is determined by substituting Qopt into the total cost formula:

The number of orders per year is computed as follows:

-------------------------------------------------

Q3: Bernard Callebaut operates a chocolate shop in Kensington. The annual demand for chocolate-covered cherries is 2,500 units. The setup cost is $15 per order. The holding cost per unit per year is $0.25. What is the optimum number of units per order?
Solution:
= square root of [(2 x 15 x 2500) / .25(
= square root of : 300000
E0Q = 548

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