Total ordering costs are equal at the optimal solution

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Reference no: EM131774122

Suppose that the R&B Beverage Company has a soft drink product that shows a constant annual demand rate of 3600 cases. A case of the soft drink costs R&B $3. Ordering costs are $20 per order and holding costs are 25% of the value of the inventory. R&B has 250 working days per year, and the lead time is 5 days. Identify the following aspects of the inventory policy:

Economic order quantity

Reorder point

Cycle time

Total annual cost

A general property of the EOQ inventory model is that total inventory holding and total ordering costs are equal at the optimal solution, Show that this result is true in this example.

Reference no: EM131774122

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