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    EOQ & Reorder Point Activity

    Uploaded by

    Catherine Ordo
    This document provides information about reorder point and economic order quantity (EOQ) calculations for two companies - Pane Company and Jelsen Company. For Pane Company, the reorder point is calculated as 840 liters based on average daily usage, lead time, and safety stock. The average and maximum inventory levels are also calculated. For Jelsen Company, the reorder point without safety stock is calculated as 25,000 units based on average daily usage and lead time. With a recommended safety stock of 15,000 units, the reorder point is calculated as 40,000 units.

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    EOQ & Reorder Point Activity

    Uploaded by

    Catherine Ordo
    1K views2 pages
    This document provides information about reorder point and economic order quantity (EOQ) calculations for two companies - Pane Company and Jelsen Company. For Pane Company, the reorder point is calculated as 840 liters based on average daily usage, lead time, and safety stock. The average and maximum inventory levels are also calculated. For Jelsen Company, the reorder point without safety stock is calculated as 25,000 units based on average daily usage and lead time. With a recommended safety stock of 15,000 units, the reorder point is calculated as 40,000 units.

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    This document provides information about reorder point and economic order quantity (EOQ) calculations for two companies - Pane Company and Jelsen Company. For Pane Company, the reorder point is calculated as 840 liters based on average daily usage, lead time, and safety stock. The average and maximum inventory levels are also calculated. For Jelsen Company, the reorder point without safety stock is calculated as 25,000 units based on average daily usage and lead time. With a recommended safety stock of 15,000 units, the reorder point is calculated as 40,000 units.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views2 pages

    EOQ & Reorder Point Activity

    Uploaded by

    Catherine Ordo
    This document provides information about reorder point and economic order quantity (EOQ) calculations for two companies - Pane Company and Jelsen Company. For Pane Company, the reorder point is calculated as 840 liters based on average daily usage, lead time, and safety stock. The average and maximum inventory levels are also calculated. For Jelsen Company, the reorder point without safety stock is calculated as 25,000 units based on average daily usage and lead time. With a recommended safety stock of 15,000 units, the reorder point is calculated as 40,000 units.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    CHAPTER 2 ACTIVITY

    EOQ AND REORDER POINT

    1. Pane Company has developed the following data to assist in controlling one of its material
    inventory items:
    Economic order quantity 1,000 liters
    Average daily usage 100 liters
    Maximum daily usage 120 liters
    Working days per year 250 days
    Safety stock 140 liters
    Cost of carrying inventory P1.00 per liter per year
    Lead time 7 working days

    QUESTIONS:
    a) What is the reorder point?
    Reorder Point = (Average Daily Usage x Lead Time) + Safety Stock
    (100 x 7 days) + 140
    = 840 liters

    b) What is the average inventory?


    Average Inventory = EOQ/2
    1000/2
    = 500 liters

    c) What is the maximum inventory assuming normal lead time and usage?
    Maximum Inventory = (Order Point – Normal Time Usage) + EOQ
    (840-700) + 1,000
    = 1,140 liters

    d) What is the cost of placing one order?


    Cost of Placing one order = EOQ = √2 x 25,000 OC
    1
    1,000 = √ 50,000 OC
    1
    1,000,000 = 50,000
    50, 000 50,000
    Ordering Cost- P20

    2. Jelsen Company sells educational toys. One raw material that it orders is plastic. The plastic
    is melted and placed in molds to be used for the production of various toys. Information
    pertaining to the plastic raw material is as follows:

    Economic order quantity 50,000 pounds


    Average daily usage 5,000 pounds
    Maximum daily usage 8,000 pounds
    Lead time 5 days

    QUESTIONS:
    a) What is the reorder point assuming no safety stock is carried?
    Reorder Point (no safety stocks) = Normal Lead Time x Average Usage
    5 days x 5,000
    = 25,000 units

    b) Should the company decide to carry safety stock, how many units should that be?
    Safety Stock = (Maximum Usage – Normal Lead Time) Average Usage
    (8,000 – 5,000) x 5 days
    3,000 x 5 days
    = 15,000 units
    c) What is the reorder point assuming that safety stock is carried?
    Reorder Point (safety stocks required) = Safety Stock x Normal Lead Time
    15,000 + 25,000
    = 40,000 units

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