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    Activity 2 - Inventory Management

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    fayesandig
    This document contains an activity on inventory management problems. It provides 4 examples that calculate economic order quantity, total minimum cost, optimal number of orders per year, and optimal time between orders given annual demand, ordering cost, and carrying cost. For each example, it shows the calculations and decision analysis stating the ideal order size and number of orders to minimize total annual cost.

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    Activity 2 - Inventory Management

    Uploaded by

    fayesandig
    36 views2 pages
    This document contains an activity on inventory management problems. It provides 4 examples that calculate economic order quantity, total minimum cost, optimal number of orders per year, and optimal time between orders given annual demand, ordering cost, and carrying cost. For each example, it shows the calculations and decision analysis stating the ideal order size and number of orders to minimize total annual cost.

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    This document contains an activity on inventory management problems. It provides 4 examples that calculate economic order quantity, total minimum cost, optimal number of orders per year, and optimal time between orders given annual demand, ordering cost, and carrying cost. For each example, it shows the calculations and decision analysis stating the ideal order size and number of orders to minimize total annual cost.

    Copyright:

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

    Activity 2 - Inventory Management

    Uploaded by

    fayesandig
    This document contains an activity on inventory management problems. It provides 4 examples that calculate economic order quantity, total minimum cost, optimal number of orders per year, and optimal time between orders given annual demand, ordering cost, and carrying cost. For each example, it shows the calculations and decision analysis stating the ideal order size and number of orders to minimize total annual cost.

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    ACTIVITY 2

    INVENTORY MANAGEMENT
    Name: Sandig, Faye Arlene Ninez G. Date: May 30, 2022
    Course: Production and Operation Management Professor: Dr. Jay Sario

    Direction: Solve the following problems:


    1. Given the following annual demand, annual carrying cost, and cost per order,
    compute the economic order quantity and total minimum cost. Give your decision
    analysis.
    D = 10,000 units per year
    Co = Php5,000 per order
    Cc = Php25 per unit per year

    Cost per order 5,000


    Carrying Cost 25
    Annual Demand 10,000
    Economic Order Quantity 1,414
    No of order per year 7
    Ordering cost 35,355
    Carrying Cost 17,678
    Total minimum cost 53,033

    The ideal order size to minimize cost and meet demand is 1,414 with a minimum
    cost of Php 53,033 annually.

    2. Given the following annual demand, carrying cost, and cost per order, compute
    the economic order quantity and total minimum cost. Give your decision analysis.
    D = 38,000 units per year
    Co = Php2,200 per order
    Cc = Php8 per unit per year

    Cost per order 2,200


    Carrying Cost 8
    Annual Demand 38,000
    Economic Order Quantity 3,233
    No of order per year 12
    Ordering cost 25,861
    Carrying Cost 12,931
    Total minimum cost 38,792

    The ideal order size to minimize cost and meet demand is 3,233 with a minimum
    cost of Php 38,792 annually.
    3. An inventory system has an annual ordering cost of Php12,000 per order, an
    annual per unit carrying cost of Php35, and an annual demand of 3,000 units
    (assuming a 365-day year). Compute the following:
    a. Economic order quantity - 1,014
    b. Minimum total annual inventory cost – Php 53,245
    c. Optimal number of orders per year - 3
    d. Optimal time between orders – 8.22 days
    e. Give your decision analysis
    The ideal order size to minimize cost and meet demand is 1,014
    with a minimum cost of Php 53,245 annually. There will be 3
    optimal number of orders per year with an ideal interval of 8.22
    days between orders.

    Cost per order 12,000


    Carrying Cost 35
    Annual Demand 3,000
    Economic Order Quantity 1,014
    Optimal number of orders/year 3
    Ordering cost 35,496
    Carrying Cost 17,748
    Total minimum cost 53,245
    Optimal time between orders 8.22

    4. The Alpha Shoe Company purchases leather from Beta Textile Mills. The
    Alpha Company uses 15,000 yard of leather per year (365 days) to make shoes.
    The cost of ordering leather from the textile company is Php100,000 per order. It
    costs Alpha Php30 per yard annually to hold a yard of leather in inventory.
    Determine:
    a. Optimal number of yards of leather the Alpha Company should order. - 7,071

    b. Minimum total annual inventory cost – Php 318,198


    c. Optimal number of orders per year - 2
    d. Optimal time between orders - 41.10 days
    e. Give your decision analysis
    The ideal order size to minimize cost and meet demand is 7,071 with a
    minimum cost of Php 318,198 annually. There will be 2 optimal number of
    orders per year with an ideal interval of 41.10 days between orders.
    Cost per order 100,000
    Carrying Cost 30
    Annual Demand 15,000
    Economic Order Quantity 7,071
    Optimal number of orders/year 2
    Ordering cost 212,132
    Carrying Cost 106,066
    Total minimum cost 318,198
    Optimal time between orders 41.10

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