Question: A B D E F G H - J L M N O P Q R 1 Economic Order Quantity 2 Inventory Costs 3 4

A B D E F G H - J L M N O P Q R 1 Economic Order

A B D E F G H - J L M N O P Q R 1 Economic Order Quantity 2 Inventory Costs 3 4 Demand = Cost per item = $ $1 5 A= 10,000 Annual Requirements or Demand 150.00 Purchase cost per Unit Annual Usage, in dollars 125.00 Administrative costs per order of placing the order 28% Carrying costs of the inventory (expressed as an annual percentage of the inventory dollar value) $1 6 B = $ CE $1 7 $1 8 9 $1 EOQ value = EOQ units = (exact value) (rounded number) Annual Cost $1 10 $0 Holding Cost Ordering Costs Total Cost 11 $0 12 Using this inventory management system, every time that you need to order this item, you buy EOQ of them! $0 13 $0 14 EXTRA: What if your supplier requires you to purchase only in cases of 60 units each? How much extra would this cost in a year? Hint -- use the the table on the "Chart data" tab for the computation of "Total Annual Cost" for your EOQ and the best Case Lot. 15 $- 0 1 16 0.2 0.4 0.6 0.8 Quantity per Order 17 When to order is another question.... See the next assignment to compute the Reorder Point. 18 19 20 21 22 EOQ = 2AB/C 23 24 Where 25 26 27 28 EOQ = the most economic order size, in dollars A = annual usage, in dollars B = administrative costs per order of placing the order carrying costs of the inventory (expressed as an annual percentage C of the inventory dollar value) 29 30 31 A B D E F G H K L 1 2 3 4 Demand = A= 5 6 7 10,000 Annual Requirements or Demand O Annual Usage, in dollars $ 150.00 Purchase cost per Unit $125.00 Administrative costs per order of placing the order 28% Carrying costs of the inventory (expressed as an annual percentage of the inventory dollar value) B = C= EOQ = 0 0 Min Q Max a 0 9 10 11 12 13 14 15 16 17 18 Q 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Annual Orde Annual Holding Total Cost #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! 0 #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0! #DIV/0! $ #DIV/0!

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