EOQ model exercise

Here we have a table which summarizes stock costs within a company:

 

Items

 

Annual demand

Purchase cost

(Euros per unit)

Set up cost

(Euros per unit)

Holding cost

(Euros per unit and year)

Paper 7000 2 1 0.1
Pen 6500 1   0.05
  1. What is the optimal order quantity for the first item?

Answer: the optimal order quantity is 374.17 = 375.

  1. The second item is ordered in 3000 units’ quantities each year. How much money its setting up requires?

Answer: the set up cost is 34.62 per unit.

  1. The company is thinking about its inventory management because the logistics manager is uneasy with the budget and he wants to know how many orders make the company each year and how much time is passing between orders. He thinks the company is dawdling away time.

Answer: the time between paper orders is 20 days aprox. The time between pen orders is 168 days aprox.

  1. The manager also wants to know the lead time for the first item. We know that the reorder point for this item is 350 units.

Answer: the lead time for the first item is 18 days aprox.

  1. The manager also wants to know the ROP for the second item. We know that the lead time is 40 days.

Answer: ROP pen = 712 units.

  1. What is the paper total annual cost?

Answer: TC paper = 14037.42

By: Lorena Úbeda González

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s