Economic Order Quantity (EOQ) is a method used to calculate the ideal quantity to order. The underlying concepts of EOQ is the balance between ordering cost and holding cost. perform two calculations: A = annual demand = 20,000 Cp = Cost of an order which includes preparing and following up the order = $100.00 Ch = Unit inventory cost per year or item cost (P) $100 times annual carrying cost rate (r) (25%) 1. Use an excel file to calculate the EOQ order. Follow the video provided:
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Economic Order Quantity (EOQ) is a method used to calculate the ideal quantity to order. The underlying concepts of EOQ is the balance between ordering cost and holding cost.
perform two calculations:
- A = annual demand = 20,000
- Cp = Cost of an order which includes preparing and following up the order = $100.00
- Ch = Unit inventory cost per year or item cost (P) $100 times annual carrying cost rate (r) (25%)
1. Use an excel file to calculate the EOQ order. Follow the video provided:
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- 1. Calculate Economic Order Quantity (EOQ), number of orders, annual ordering costs, annual carrying costs and total inventory costs from the following: Annual consumption: 6000 units ; Cost of placing one Order: RO 60 Carrying cost per unit: RO 22. Find out the EOQ, Annual ordering cost and annual holding cost from the following information. The demand is 19500 units per year, holding cost is RO 4 per unit for a year and ordering cost is RO 25 order. 3. Find out the ordering cost from the following information, Annual demand is 240 units, holding cost RO 4 per unit for a year and EOQ is 60 units.A company operates for 50 weeks a year and uses a fixed quantity inventory system for one of its most important items. Below are the characteristics for the item: Weekly demand follows normal distribution: mean of 400 units and standard deviation of 100 units Order Cost = $40 per order Annual Holding cost = $2/unit/year Desired service level = 95% (z = 1.645) Lead Time = 4 weeks Economic Order Quantity (EOO) = 894 units Now suppose that the management is considering switching to a fixed time inventory system where the time between orders is 2 weeks. Everything else being the same as the information provided for the original problem, which system (Q or P system) is likely to have more safety stock? Please explain why.An EOQ model that incorporates quantity discounts is used to determine: a. whether to use fixed-quantity or fixed period order policy b. what is the lowest amount of inventory necessary to satisfy a certain service level c. how many units should be ordered d. what is the lowest purchasing price
- Green Grass Industries Limited (GGIL) has used a fixed-time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs, are forcing GGIL, to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such a shortage costs. Table 10 is a random sample of 20 GGIL's items. Table 10. Annual Usage by Value of a sample of GGIL's Inventory Item Number Annual Usage ($) Item Number Annual Usage ($) 1 10,600 11 2,750 2 14,000 12 1,400 3 4,000 13 3,200 4 16,000 14 2,500 5 8,100 15 110,000 1,800 16 14,800 7 84,000 17 9,500 8. 890 18 1,700 9 940 19 3,700 10 94,000 20 12,500 a) What would you recommend GGIL to do to cut back its labor cost? (Illustrate using an ABC plan). b) Item 18 is critical to continued operations at GGIL. i. How would you recommend it be classified? ii. Give the reason(s) for your answer.The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the average inventory level?A printing company anticipates using 40,000 reams of paper at a uniform rate over the next year. Each time they place an order for X units of reams of paper, it is charged a flat fee of $200. Carrying costs are $4 per unit per year. A. use the formula for Economic Order Quantity to find out how many reams of paper they should purchase in each order. B. how many orders should they place over the year?
- A golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory policy for its 1-irons, which have the following characteristics: > Demand (D) = 2,000 units/year > Demand is normally distributed > Standard deviation of weekly demand = 2 units > Ordering cost = $30/order > Annual holding cost (H) = $5.00/unit > Desired cycle-service level = 85% > Lead time (L) = 4 weeks Refer to the standard normal table for z-values. a. If the company uses a periodic review system, P should be 3.87 weeks. (Enter your response rounded to the nearest whole number.) T should be units. (Enter your response rounded to the nearest whole number.)the economic order quantity (see Chapter 12 for EOQformulas) for its halogen lamps. It currently buys all halogenlamps from Specialty Lighting Manufacturers in Atlanta. Annualdemand is 2,000 lamps, ordering cost per order is $30, and annualcarrying cost per lamp is $12.a) What is the EOQ?b) What are the total annual costs of holding and ordering(managing) this inventory?c) How many orders should D iscount-Mart place with SpecialtyLighting per year?Palin's Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to determine the optimal inventory target level (or order-up-to level). $ 35 Ordering cost Service probability Lead time per order 2,970 6. mufflers Annual demand Standard deviation of daily demand mufflers per working day 89 % working days per muffler * of item value working days $21.00 4 Item cost 36 Working days 270 per year Annual holding cost Review period 22 a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV) function to find the correct critical value for the given a-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.) Optimal target level b. If the service probability requirement is 90 percent, the optimal target level will: O Increase O Decrease O Stay…
- Kendi Company uses 800 units of a product per year on a continuous basis. The product has a Fixed Cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days’ usage in inventory as a safety stock. Show Computations and Explanations. A. Calculate the EOQ. B. Determine the Average Level of Inventory. (Note: Use a 365-day year to calculate daily usage.) (Format: 111.11) C. Determine the Reorder Point. (Format: 11.11)A local distributor for Hankook tires Company expects to sell 12,600 R14 radial tires nest year. The estimated cost of keeping a R14 tire per annum is ȼ126 and ordering cost is ȼ70. a) What is the optimal order quantity? b) How many times per year does the distributor order R14 tires? c) What is the length of an order cycle, if the company does not operate on Saturdays and Sundays? d) What is the annual total cost if the optimal quantity is ordered?Briefly explain five of the assumptions leading to the basic economic order quantity model (EOQ) The Star Equipment Company purchases 54,000 bearing assemblies each year at a unit cost of $40.00. The holding cost is $9.00 per unit per year, and the ordering cost is $20.00. What is the economic order quantity? How many orders should be placed per year? If the lead time is one (01) month, what is the re-order point for the assemblies?