A Company Produces Item Y, and Uses the Basic EOQ

question 100

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 total annual inventory cost for product Y. Include the item cost in your calculations. (Assume 52 weeks of operation per year.)

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Definitions:

Dependent Variable

The dependent variable is the variable being tested and measured in an experiment or study, whose value is expected to change as a result of manipulations to the independent variable(s).

Independent Variable

is a factor or condition that is intentionally manipulated or varied by researchers to observe its effect on a dependent variable in an experiment.

Constraint

A limitation or restriction that affects the process or progress of a project, operation, or strategy.