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What happens to the eoq

Assignment Help Operation Management
Reference no: EM132691540

Please notice that this question is about the inventory:AT THIS QUESTION PLEASE JUST SOLVE THE SECOND BRANCH,

  • First branch of the question: Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are:

Demand (D) = 15,080 units/year

Ordering cost (S) = $125.00/order

Holding cost (H) = $3.00/unit/year

Lead time (L) = 5 weeks

Cycle service level = 95 percent

Demand is normally distributed, with a standard deviation of weekly demand of 64 units.

a) Calculate the item's EOQ.

b) Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item.

c) Which system requires more safety stock and by how much?

d) How do you think each system can affect your procurement procedures/methods?

NOTICE HERE THAT I DONT WANT THE SOLUTION FOR THE ABOVE QUESTIONS, I JUST NEED U TO SHOW ME HOW TO SOLVE THESE FOLLOWING QUESTION UNDERNEATH: ????

Second branch at the question: For the data presented in the first branch of the question: Create interactive excel model that helps you in answering the following questions:

a) What happens to the EOQ and the total cost when demand is doubled?

b) What happens to the EOQ and the total cost when unit price is doubled?

c) What is the annual cost of holding inventory at the EOQ and the annual cost of ordering inventory at the EOQ?

d) Comment on the sensitivity of the EOQ model to errors in demand or cost estimates.

e) How much does the total cost increase if the store manager orders twice as many units as the EOQ?

f) How much does the total cost increase if the store manager orders half as many units as the EOQ?

g) What is the EOQ and what is the lowest total cost?

h) What happens to the EOQ if the order cost goes lower?

i) What can you conclude about the relationship between the lowest total cost and the costs of ordering and holding inventory?

Reference no: EM132691540

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