2.An item is produced at the rate of 50 items per day.

The demand occurs at the rate 25 items per day. If the set up cost is Rs.100 per set up and the holding cost is Rs.0.01 per unit of item per day, find the economic lot size for one run, assuming that the shortage are not permitted. Solution: C4 = Shortage cost C3 = Inventory cost Purchasing, setup, ordering cost= C2= Item cost = C1 Holding Cost = C3 Ordering = C2 Shortage = C4 D=25 per day = 750 per Month R = 50 per day =1500 per month C2=100 per setup C2 = 0.01 per unit/day C2 = 0.01 per unit/month Economic lit size = Q= = 2c 2 D c3 R R D

2x 100x 750 1500 0.3 1500 750

= 500000x 2 = 707 x 1.414 EOQ = 1000 Units

3.The demand of an item is uniform at a rate of 25 units per month. The fixed cost is Rs.15 each time a production is made. The production cost is Rs.1/ item, and the

inventory carrying cost is Rs. 0.30/item/month. If the shortage cost is Rs.1.50/item/month, determine how often to make a production run and of what size it should be? Solution: D = 25 units Per Month Item = fixed Cost =15 C2 = Production on Cost = 1 / Item C3 = Holding Cost Inventory Carring Cost =0.3 /Item/Month Shortage Cost = C4 = 1.5 /Item/Month EOQ =? Q* t = D
*

How to make A Production run =? C 3 +C 4 2c 2 D D C4 c 3 (1 ) R

Q=

2x 1x 25 0.3 + 1.5 25 1.5 0.3(1 ) 44

50 x 1.2 0.13 = 19.61x 1.095 = Q * = 21Items How to make a production Run = t =Q/D =21/25 =0.84 Months