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Compute the Economic Order Quantity (EOQ)

Find the EOQ (Qe), the total cost, and the reorder point in units given:

Table 3. EOQ Example

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ItemVariableValue and units
PriceP$ 100
Annual DemandD100,000 units
Order CostO$ 100 per order
InterestI5 %
Holding CostH$ 2 per unit
Lag Time 3 days

Write a short paper that presents the calculation (a photo or scan of the formula and calculation is acceptable) and describes what the results of the calculation mean.

Identify the Aspects of Planning

Prepare a memo to the finance managers of the Healthcare Organization (HCO) in which you explain industry best practices regarding aspects of strategic planning. Include an explanation of the relationship between economic ordering quantity(EOQ), stock out, and risk.

What possible risk(s) might the HCO face if it has a materials management policy that seeks to reduce inventory carrying costs and therefore has an EOQ on critical items that reflects that policy.

Questions to Address in your Submission:

Describe the process to finance managers to determine the correct quantity that will both avoid a shortage or reduce the cost carrying extra inventory. 

What are other considerations (i.e., product shortages, lead times for delivery, or price increase)?

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