Title
Operations Management - Inventory Management : Calculating EOQ - Example 2Creator
Bonnie Simmons and Memorial University. Centre for Innovation in Teaching and Learning (CITL)Description
Inventory is the stock of items kept to meet future demand, such as materials for production and products for sale. Decisions related to inventory management include how many units to order and when to order. EOQ (Economic Order Quantity) model for an item will minimize the sum of annual costs of holding and ordering inventory. This video demonstrates how to calculate the EOQ answering the following questions regarding the example:
A large bakery buys flour in 25 kg bags. The bakery uses an average of 4,860 bags a year. Preparing an order and receiving the shipment of flour bags involves a cost $10 per order. Annual holding cost is $5 per flour bag.
a. Determine the economic order quantity (EOQ).
b. What is the average number of bags on hand (i.e. in inventory)?
c. How many orders per year will there be?
d. Calculate the total annual cost of ordering and holding flour.
e. If ordering costs were to increase by 50 percent per order, by what percentage would the EOQ change?
Learning Design
Calculate the EOQ for the scenario given.Date Created
2017Format
Video/mp4Duration
06:58 minutes/seconds