Assesment Quiz Formulas
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1
Q Optimal (Q*)
sqroot(2DS/H)
2
# of times to order a year
D/Q*
3
# of days/weeks/months elapsed between two consecutive orders
Q*/D x # of days/weeks/months a year
4
Cost of Orders per Year (annual ordering cost)
(D/Q*) x S
5
Cost of Holding Inv per Year (annual holding cost)
(Q*/2) x H
6
Total Annual Cost
Cost of Holding Inv per Year + Cost of Orders per Year (values should match if using Q*)
7
Annual Cost to Carry Safety Stock
SS x H
8
Reorder Point
ROP = (dbar x L) + SS
(dbar and L need to be same unit)
(dbar and L need to be same unit)
9
Holding Cost Rate
H = C x i
10
Avg Inv Within Firm
(Q*/2) + SS
11
Avg Pipeline Inv
dbar x L
12
Total Avg Inv Owned by Firm (pay upon ordering)
(Q*/2) + SS + (dbar x L)
13
Total Avg Inv Owned by Firm (cash on delivery)
(Q*/2) + SS
14
Rule #1
if avg inv increases, holding inv cost also increases
15
Avg Inv (w/o SS)
Q*/2
16
Annual Purchase Cost
C x D
17
D
demand rate (units/yr)
18
C
cost of purchasing or producing a unit (dollars/(unit))
19
S
setup cost or per order or per production run (dollars/order)
20
H
annual holding cost per unit of inventory (dollars/(units)/year)
21
i
annual percentage holding cost
22
Q
quantity of an order (units)
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