Question
The demand of a certain part is 1000 parts/year and its cost is ₹1000/part. The orders are placed based on the economic order quantity (EOQ). The cost of ordering is ₹100/order and the lead time for receiving the orders is 5 days. If the holding cost is ₹20/part/year, the inventory level for placing the orders is _________ parts (round off to the nearest integer).
Answer :
Correct answer is : 14
Demand, D = 1000 parts/year , Cost C = Rs. 1000/part
Co= Rs. 100/order, Ch = Rs. 20/part/year, Lead time LT = 5 days
EOQ = = = 100
Number of orders = D/ EOQ = 1000 /100 = 10
Daily demand = 1000/ 365 = 2.73 ≈ 3
Reorder point = lead time × daily demand
Reorder point = 5 × 2.73 = 13.69 ≈ 14 parts
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