Economic Order quantity EOQ, Economic Production Quantiry EPQ

Feb 3rd, 2012
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California Institute of Technology
Course: operations management
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Objective 309.3.1-06: Determine order size using the economic order quantity model. Objective 309.3.1-07: Determine lot size using the economic production lot size model. A variety of criteria and techniques can be used to determine how many units of a product to purchase or produce and what parameters to set for inventory management. In this task, apply the economic order quantity model and the economic production lot model to related decisions. Given: Company A’s demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total $38 per order. The annual holding cost rate is 26% of the value of the inventory. The per-unit cost of inventory is $12. Company B’s demand is uniform throughout the year and totals 15,000 units per year. The production setup costs total $84 per setup. The annual holding cost rate is 28% of the value of the inventory. The per-unit cost of finished product is $19. The production rate is constant and equivalent to 60,000 units per y

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