Barbara Bright is the purchasing agent for West Value Company. West Valve sells industrial values and fluid control devices. One of

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Barbara Bright is the purchasing agent for West Value Company, which specializes in selling industrial valves and fluid control devices. One of the most popular products is the Western valve, which has an annual demand of 4,000 units. Each valve costs $90, and the estimated inventory carrying cost is 10% of the valve's cost. Barbara has conducted a study on the costs associated with placing orders for the various products that West Value stocks and has determined that the average ordering cost is $25 per order. Additionally, it takes approximately two weeks for an order to arrive from the supplier, during which time the demand for Western valves is about 80 units per week. 
a) What is the Economic Order Quantity (EOQ)?
b) What is the Reorder Point (ROP)?

Anonymous · Accepted Answer

EOQ = 149.07 unitsRe-order Point  (ROP) =  160 unitsExplanation:The Economic Order Quantity (EOQ) is the order size that minimizes the balance of ordering cost and holding cost. At the EOQ, the carrying cost is equal to the holding cost. It is computed using he formulae belowEOQ = √ (2× Co× D)/ChEOQ = √ (2× 25× 4000)/(10%× 90)EOQ = 149.07 unitsRe-order Point  (ROP) The level of stock at which  are replenishment order will be placedMaximum consumption × maximum lead time= 80× 2 =  160 units

Nikko Gusikowski · Answer

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Anonymous · Answer

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Barbara Bright is the purchasing agent for West Value Company. West Valve sells industrial values and fluid control devices. One of

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