5 Questions
What does the symbol D represent in the given content?
Demand rate (number of pumps ordered annually)
What is the ordering cost per order (Co)?
£10
What is the holding cost per pump per year (Cs)?
£1.35
What is the price per pump (P)?
£7
How many pumps are purchased annually by Sumco Pump Co.?
1200 pumps
Study Notes
EOQ Example: Sumco Pump Co.
- Sumco Pump Co. purchases pumps from a manufacturer and sells them to retailers.
- The company's annual demand (D) is 1200 pumps.
- The cost of placing an order (Co) is £10 per order.
- The cost of storing a pump (Cs) is £1.35 per pump per year.
- The purchase price of a pump (P) is £7.
Calculating Order Quantity
- To determine the optimal order quantity, the company needs to consider the annual demand, ordering cost, storage cost, and purchase price.
Calculate the Economic Order Quantity (EOQ) for Sumco Pump Co., a company that buys pumps from a manufacturer and sells to retailers. The EOQ problem involves determining the optimal order quantity based on annual demand, cost per order, and cost per unit.
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