PALAD, Ronnel D.

BSA 21

ACTIVITY - INVENTORY MANAGEMENT

1. A local distributor for a national tire company expects to sell 9,600

steal belted radial tires of a certain size and tread design next year.
Annual carrying costs are P16 per tire and ordering costs are P75.
The distributor operates 288 days a year. Determine the EOQ. How
many times a year does the store reorder? Determine length of order
cycle.
Legends:
D= Annual Demand
S=Cost
H=Holding Cost
Q=JIT
Data:
(D)= 9,600 steal belted radial tires
(S)= P75 Ordering costs
(H)= P16 Annual Carrying costs

- EOQ
Formula:√(2DS/H)

√(2(9,600)75/16)=300 tires

-Number of orders per year

Formula: D/Q

(9,600 tires/year)/(300tires/order)=32 orders

- Length of order cycle:

Formula : Q/D

(300 tires)/(9,600 tires/years)= 1⁄32 of a year, which is 1⁄32 x 288= 9 work days
PALAD, Ronnel D.
BSA 21

2. ATV manufacturing assembles televisions sets. It purchases 3,600

black and white tube a year at P 65 each. Ordering costs are P31,
and annual carrying costs are 20% of the purchase price. Compute
the optimal quantity and the total annual cost of ordering and carrying
the inventory.
Legends:
D= Annual Demand
S=Cost
H=Holding Cost
Q=JIT
Data:
(D)= 3,600 black and white tube
(S)= P31 Ordering costs
(H)= .20(P65) =P13 Annual Carrying costs

- EOQ
Formula:√(2DS/H)
(2(3,600)31/13)= 131 black and white tube

Formula: TAC= H+S

(EOQ/2)H+(D/EOQ)+S

= (131/2)13+(3,600/131)31
=P852 + P852
=P1,704