A finished MGT-455 Topic 6 economic order quantity problem example, with inputs in consistent units, the order size checked, a reorder point with safety stock and a broken assumption named. Searches like "mgt 455 topic 6 assignment example", "mgt455 topic 6 sample" and "mgt-455 topic 6 example" land here.
What a finished MGT-455 Topic 6 economic order quantity problem looks like
The finished problem states every input with its unit before any formula appears: annual demand of 12,000 cases, an ordering cost of 60 dollars per order, and a holding cost of 4 dollars per case per year, built as 25 percent of a 16 dollar unit cost. Every figure is illustrative and marked as such. The order quantity comes out at 600 cases, twenty orders a year, with annual ordering and holding costs each at 1,200 dollars, a match the example points out as a check on the arithmetic. A side box repeats the calculation using monthly demand against the annual holding cost and gets 173 cases, showing what the unit error produces. The reorder point follows from 40 cases a day over a five-day lead time plus about 30 cases of safety stock at a 95 percent service level.
How an MGT-455 Topic 6 example is structured
The example is set out as a worked problem in the order a reader checks it. An inputs table opens it, one row per figure with its unit and source, since the formula only works when demand and holding cost cover the same period. A second part computes the order quantity, the number of orders per year and the average inventory. A third totals annual ordering and holding cost and uses their equality at the optimum to confirm the result. A fourth derives the reorder point from daily demand and lead time. A fifth adds safety stock from the variability of daily demand and a stated service level, showing the z value used. The sixth part lists the model's assumptions, constant demand, a fixed lead time, no quantity discounts, and marks which one this item violates. It closes on what the spring deck-building season does to the order size.
Inputs tabled with their units
Annual demand, cost per order and holding cost per case per year sit in one table, so a mismatch in periods is visible before any calculation.
Order quantity checked by cost equality
At 600 cases the annual ordering cost and annual holding cost both come to 1,200 dollars, which confirms the formula was applied correctly.
The unit error shown beside it
Feeding monthly demand against an annual holding cost yields 173 cases, and the side box keeps that wrong answer visible for comparison with the right one.
Reorder point from lead time demand
Forty cases a day across a five-day lead time gives 200 cases, to which safety stock is added before the reorder trigger is set.
Safety stock tied to variability
A daily standard deviation of 8 cases over five days and a 95 percent target produce about 30 cases of buffer, for a reorder point of 230.
Assumptions listed and one broken
Steady demand is the assumption this item fails, because spring deck building concentrates sales into a few months that the annual average smooths away.
Where marks go in MGT-455 Topic 6
Wrong units cost more marks in this topic than any conceptual slip. An order quantity computed from monthly demand and an annual holding cost is simply incorrect, and a marker checking the arithmetic will find it in seconds. Holding cost given as a percentage without converting it to dollars per unit per year leaves the formula with an input it cannot use. Papers that report the order quantity and stop never answer when to order, which is a separate figure built from lead time. Safety stock described as a cushion with no service level or variability behind it cannot be defended or resized. The assumptions section is where many otherwise correct papers lose the analytic mark, listing the model's conditions without saying which one the item in question violates or what that does to the result.
Get an MGT-455 Topic 6 example written to your instructions
Send the MGT-455 Topic 6 problems and the rubric from your classroom, with the demand, cost and lead time figures your section supplied. A custom example is written to those criteria, with inputs tabled by unit, the order quantity checked, the reorder point and safety stock derived and the broken assumption named, returned in 24 to 48 hours. The first one is free.
MGT-455 Topic 6 questions, answered
What is the EOQ formula?
The economic order quantity equals the square root of two times annual demand times the cost per order, divided by the holding cost per unit per year. It finds the order size where annual ordering cost and annual holding cost are equal, which is also where their total is lowest. Every input must refer to the same time period, usually a year.
How is the reorder point different from the order quantity?
The order quantity says how much to buy; the reorder point says when. The reorder point equals demand during the lead time plus any safety stock, so it depends on how fast the item sells and how long a supplier takes to deliver. An item can have a sensible order quantity and still run out if the reorder point is set too low.
What should a paper do when demand is seasonal?
Say so, and show the consequence. An order quantity based on the annual average orders too little during the busy months and holds too much during the quiet ones. Common responses include computing separate quantities for each season or reviewing the reorder point quarterly. The example names the season and the direction of the error rather than presenting one figure as right all year.