economic review period in weeks =
= ((A / B) ^ (0.5))
A =
= (5,408 * (order cost in dollars))
B =
= (annual usage) * (unit cost) * (holding cost as percent of unit cost from 0 to 100) / 100
where:
• order cost: cost to place an order and receive the item, including costs of the purchasing, receiving and accounts payable departments
• unit cost: cost of a single unit for item being evaluated
• holding cost: The cost to handle and maintain the item once in the health care facility, including capital and inventory costs; typically may run 20-40% of the item cost. The average holding cost for an institution can be estimated relatively easily, while the precise holding cost for an item in dollars may be harder to determine.
• 5408 = 288 * ((average number of weeks in month) ^2); with 288 a constant and the average number of weeks per month = 52/12 = 4.33
