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Hi John
Could you pls help me with the PQR CO mock exam question, it’s to calculate frequency of placing an order. My workings get me to 30 days where the correct answer is 24. Could you please explain?
Regards,
AgnesThe EOQ is 6000 units (ask again if you did not get that correct).
In total the demand is 7500 per month, which is 12 x 7500 = 90,000 a year.
So, they will have to place an order 90,000/6,000 = 15 times a year.
Assuming 365 days in a year, they will therefore need to place an order every 365/15 = 24.3 days (so 24 to the nearest day).
Hi John
Thank you very much, it makes sense now.
Much appreciated.
Regards,
AgnesHi. Sorry. No matter what I do I cannot come up with 6000 as the EOQ.
EOQ = SQUARE RT ((2xORDER COST x DEMAND\HOLDING COST)
= _|2x100x90,000 / 45,000
So that spits out square root of 400 = 20 which is ridiculous.
I get the holding cost as 10% of Purchase price per year so 90,000 units x $5 x 10%
Please help as this is driving me mad.
Thanks
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