Consider a Basic Economic Order Quantity (EOQ) Model with the Following

question 5

Essay

Consider a basic economic order quantity (EOQ) model with the following characteristics:
$\begin{array}{ll}\text { Item cost: } & \$ 15 . \\\text { Item selling price: } & \$ 20 .\\\text { Monthly demand: } &500 \text { units (constant) }\\\text { Annual holding cost: } & 9 \% \text { of purchase cost }\\\text { Cost per order: }& \$ 18\\\text { Order lead time: } & 5 \text { days } \\\text { Firm's work year: } & 300 \text { days ( } 50 \text { weeks } @ 6 \text { days per week) } \\\text { Safety stock: } & 15 \% \text { of monthly demand }\end{array}$

For this problem, determine the values of:
A.Q* the optimal order quantity.
B.R, the reorder point.
C.T, the cycle time.
D.M, the maximum quantity in inventory.
E.Total annual inventory cost.
F.Suppose the vendor demands purchases in multiples of 500 only.
What is the increase in total annual inventory cost that this causes?

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Definitions:

Conditioned

Having learned a response or behavior through the process of conditioning, often in relation to a specific stimulus.

Delayed Conditioning

A classical conditioning procedure in which the conditioned stimulus is initiated before the unconditioned stimulus and both stimuli end at the same time.

Temporal Conditioning

is a type of classical conditioning where a stimulus is presented at regular intervals, leading to an anticipatory response.

Unconditioned Stimulus

An event or circumstance that automatically triggers a naturally occurring response without any prior learning.