Question

Demand for a particular item averages 100 units a week, and based on this item's particulars (its holding cost, ordering cost, etc.) the Economic Order Quantity for it has been determined to be 400 units. If we wanted to manage this item using a Periodic Review approach, what would be the optimal order interval (in weeks)? (Just five the number, not the units).

Answer 1

The optimal order interval is 4 weeks when managing an item with a weekly demand of 100 units and an Economic Order Quantity of 400 units using a Periodic Review approach.

Step-by-step explanation:

The student's question seeks to determine the optimal order interval using a Periodic Review approach given that the demand for a particular item is 100 units a week and the Economic Order Quantity (EOQ) is 400 units. To calculate the optimal order interval in weeks, you would divide the EOQ by the average weekly demand.

The calculation is: 400 units / 100 units per week = 4.

Therefore, the optimal order interval using the Periodic Review approach would be 4 weeks. This interval aligns the ordering frequency with the EOQ to minimize the sum of holding and ordering costs over time.