Using the Data Below, Find the Economic Order Quantity (EOQ)

question 85

Essay

Using the data below, find the economic order quantity (EOQ), the total annual cost associated with the economic order quantity, and the reorder point.
$\begin{array}{|l|l|}\hline\text { Annual Demand: } & 15,000 \text { units } \\\hline \text { Weeks Operating: } & 52 \text { weeks/year } \\\hline \text { Ordering Costs: } & \$ 60 / \text { order } \\\hline \text { Holding Costs: } & \$ 7 / \text { unit/year } \\\hline \text { Lead Time: } & 5 \text { weeks } \\\hline\end{array}$

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Definitions:

Compounded Continuously

Refers to the mathematical limit of the compound interest formula, as the number of compounding periods per year becomes infinitely large.

Annual Interest Rate

The percentage increase in money per year, including compounding, that an investment or loan grows.

Decimal Places

The number of digits to the right of the decimal point in a decimal number, indicating its precision.

Compounded Daily

A method of calculating interest where the interest earned is added to the principal daily, resulting in earning interest on interest.