Quantitative Analysis for Management, 13/e

Key Equations

Equations 6-1 through 6-8 are associated with the economic order quantity (EOQ).

(6-1)

$$\text{Average inventory level}=\frac{Q}{2}$$

(6-2)

$$\text{Annual ordering cost}=\frac{D}{Q}{C}_o$$

(6-3)

$$\text{Annual holding cost}=\frac{Q}{2}{C}_h$$

(6-4)

$$\text{EOQ}={\text{Q}}^{*}=\sqrt{\frac{2D{C}_o}{C_h}}$$

(6-5)

$$TC=\frac{D}{Q}{C}_o+\frac{Q}{2}{C}_h$$

Total relevant inventory cost.

(6-6)

$$\text{Average dollar level}=\frac{(CQ)}{2}$$

(6-7)

$$Q^{*}=\sqrt{\frac{2D{C}_o}{IC}}$$

EOQ with $C_h$ expressed as percentage of unit cost.

(6-8)

$$\text{ROP}=d\times L$$

Reorder point: d is the daily demand and L is the lead time in days.

Equations 6-9 through 6-13 are associated with the production run model.

(6-9)

$$\text{Average inventory}=\frac{Q}{2}\left(1-\frac{d}{p}\right)$$

(6-10)

$$\text{Annual holding cost}=\frac{Q}{2}\left(1-\frac{d}{p}\right)C_h$$

(6-11)

$$\text{Annual setup cost}=\frac{D}{Q}{C}_s$$

(6-12)

$$\text{Annual ordering cost}=\frac{D}{Q}{C}_o$$

(6-13)

$$Q^{*}=\sqrt{\frac{2D{C}_s}{C_h\left(1-\frac{d}{p}\right)}}$$

Optimal production quantity.

Equation 6-14 is used for the ...