1. Each year, Y Company purchases 20,000 units of an item that costs P 640 per unit. The cost of placing an order is P 480, and the cost to hold the item in inventory for one year is P 150. a. Determine the EOQ. b. What is the average inventory level, assuming that the minimum inventory level is zero? c. Determine the total annual ordering cost and the total annual holding cost for the item if the EOQ is used.
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- Solve the following EOQ model problems:1. Each year, Y Company purchases 20,000 units of an item that costs P 640 per unit. The cost of placing an order is P 480, and the cost to hold the item in inventory for one year is P 150.a. Determine the EOQ. b. What is the average inventory level, assuming that the minimum inventory level is zero?c. Determine the total annual ordering cost and the total annual holding cost forthe item if the EOQ is used.2. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips are used at a steady rate during the 240 days the plant operates. Annual holding cost is P27 per chip and ordering cost is P1,080. Lead time = 1 week.a. Find the EOQ.b. Find the reorder point.c. What would be your ordering policy for this item?d. Find the total annual cost of ordering and carrying silicon chips.3. A large bakery buys sugar in 50-kg bags. The bakery uses an average of 1,344 bags a year. Preparing an order and receiving a shipment of sugar involves a…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?EOQ, reorder point, and safety stock Alexis Company uses 916 units of a product per year on a continuous basis. The product has a fixed cost of $60 per order, and its carrying cost is $3 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. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity. a. Alexis' EOQ is units. (Round to the nearest whole number.)
- New Wave Shelving’s Inventory Manager would like to startusing an ABC inventory classification system. The followingtable shows the annual inventory usage of all the 19 compo-nent items that the company holds. Assign them to theirappropriate category.(a) Ignoring taxation, calculate the optimum order level of inventory over a one-year planning period using the EOQ model. (b) Estimate the level of safety inventory that should be carried by Toyzrfun Ltd. (c) If Toyzrfun Ltd were to be offered a quantity discount by its suppliers of 1% for orders of 30 000 units or more, evaluate whether it would be beneficial for the company to take advantage of the quantity discount. Assume for this calculation that no safety inventory is carried. (d) Estimate the expected total annual costs of inventory management if the EOQ had been (i) 50% higher, and (ii) 50% lower than its actual level. Comment upon the sensitivity of total annual costs to changes in the EOQ.Question 1 For supply item ABC, Andrews Company has been ordering 400 units per week. A new purchasing agent has been hired by the company who wants to start using the economic-order- quantity method and its supporting decision elements. She has gathered the following information: Annual demand in units Lead time, in days Ordering costs Insurance and handling costs Purchase price per unit Return on cash investment 20,800 5 $22 $7 $15 15% Required
- Tax Preparers, Inc. works 250 days per year. Th e companyuses adding machine tape at a rate of eight rolls per day. Usageis believed to be normally distributed with a standard deviationof three rolls during lead time. Th e cost of ordering the tape is$10, and holding costs are $0.30 per roll per year. Lead time istwo days.(a) Calculate the economic order quantity.(b) What reorder point will provide an order-cycle servicelevel of 97 percent?(c) How much safety stock must the company hold to have a97 percent order-cycle service level?(d) What reorder point is needed to provide an order-cycleservice level of 99 percent?(e) How much safety stock must the company hold to have a99 percent order-cycle service level?Weiss’s paint store uses a (Q, R) inventory system to control its stock levels. For a particularly popular white latex paint, historical data show that the distribution of monthly demand is approximately normal, with mean 28 and standard deviation 8. Replenishment lead time for this paint is about 14 weeks. Each can of paint costs the store $6. Although excess demands are back-ordered, the store owner estimates that unfilled demands cost about $10 each in bookkeeping and loss-of-goodwill costs. Fixed costs of replenishment are $15 per order, and holding costs are basedon a 30 percent annual rate of interest.a. What are the optimal lot sizes and reorder points for this brand of paint?b. What is the optimal safety stock for this paint?EOQ, reorder point, and safety stock Alexis Company uses 937units of a product per year on a continuous basis. The product has a fixed cost of $44 per order, and its carrying cost is $4 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. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity.
- Define each of the following in your own words and as a formula:a. Annual ordering cost.b. Annual carrying cost.c. Total annual cost.4. A beer store uses a (Q, R) inventory system to control its stock levels. For a particularly popular black ale (a type of beer), historical data shows that the distribution of weekly demand is approximately normal, with mean 7 and standard deviation 2. Replenishment lead time for this beer store is about 5 weeks. Each unit of this beer costs the store $60. Although excess demands are back-ordered, the store owner estimates that unfilled demands cost about $100 per unit in bookkeeping and loss-of-goodwill costs. Fixed costs of replenishment are $150 per order, and holding costs are based on a 30% annual rate of interest. Assume each month is equivalent to 4 weeks. (a) What are the optimal lot sizes and reorder points for this beer? (b) What is the optimal safety stock for this beer? (c) What if the unfilled demands now incur a penalty cost of $75 per unit beer per week?Each year, Y Company purchases 20,000 units of an item that costs $640 per unit. The cost of placing an order is P 480, and the cost to hold the item in inventory for one year is $150. Determine the EOQ. What is the average inventory level, assuming that the minimum inventory level is zero Determine the total annual ordering cost and the total annual holding cost for the item if the EOQ is used.