A Company Produces Item Y, and Uses the Basic EOQ

question 25

Short Answer

A company produces item Y, and uses the basic EOQ model for managing its inventory. Lead time to obtain item Y is two weeks. Demand is normally distributed with a mean of 400 units per week and a standard deviation of 40 units per week. The desired service level is 98.5%. The ordering cost is $20, and carrying cost is 20% of the items cost, which is $10.
-Determine the annual setup cost and the annual carrying cost for product Y for the economic order quantity. (Assume 52 weeks of operation per year.)

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Definitions:

Diffusion

in the context of innovation, refers to the process by which a new idea, product, or practice spreads within a population or society.

R&D Spending

Expenditures dedicated to research and development, aimed at innovation and improvement of products or processes.

Applied Research

Research aimed at solving specific practical problems, often leading to the development of new products or processes.

Basic Research

Research conducted to increase fundamental knowledge and understanding, often without immediate commercial objectives.