What is the Economic Order Quantity? What is the maximum inventory they will have on hand at any point in time? Assuming usage occurs evenly over the year. How many orders will they place?

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Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
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3. Mountain Region Hospital System is trying to determine their optimal Hepatitis C treatment
inventory policy.
The following conditions and relationships exist:
a) Annual usage is 120,000 units
b) The purchase price to MRHS is $500 per unit
c) Carrying cost is 20% of inventory value
d) Fixed ordering costs are $600
e) They do not hold any safety stock.
) Assume 360 days per year
8) Delivery lag time is 10 days.
What is the Economic Order Quantity?
What is the maximum inventory they will have on hand at any point in time?
Assuming usage occurs evenly over the year. How many orders will they place?
What is their reorder point? (That is, what will their inventory level be that triggers a new
order?)
What assumptions in the EOQ model might not be realistic in the health care setting?
Transcribed Image Text:3. Mountain Region Hospital System is trying to determine their optimal Hepatitis C treatment inventory policy. The following conditions and relationships exist: a) Annual usage is 120,000 units b) The purchase price to MRHS is $500 per unit c) Carrying cost is 20% of inventory value d) Fixed ordering costs are $600 e) They do not hold any safety stock. ) Assume 360 days per year 8) Delivery lag time is 10 days. What is the Economic Order Quantity? What is the maximum inventory they will have on hand at any point in time? Assuming usage occurs evenly over the year. How many orders will they place? What is their reorder point? (That is, what will their inventory level be that triggers a new order?) What assumptions in the EOQ model might not be realistic in the health care setting?
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