Caroline's Boutique Ltd.

EOQ Table
Annual Demand 500 No. of orders per year
Ordering Cost 80.00 value per order
Annual Holding Rate% 20 average inventory
Cost Per Unit 50.00 carrying costs
Working Days Per Year 300 ordering costs
Lead Time (days) 60 Total costs/year

Econ. Order Qnty 89.44 Economic Order Quantities

Request Order Qnty 75.00 Optimal number of orders per year
% Change from EOQ -16.15 Optimal value per order
Optimal number of days' supply per orde
Annual Holding Cost 447.21 375.00 Optimal number of units per order
Annual Order Cost 447.21 533.33
Tot. Ann. Cost (TAC) 894.43 908.33
% Over Minimum TAC 1.55

Max. Inventory Level 89.44 75.00

Avg. Inventory Level 44.72 37.50
Reorder Point 100.00 100.00

No. of Orders/Year 5.59 6.67

Cycle Time (Days) 53.67 45.00

A 16.15% negative deviation from the EOQ resulted in only a 1.55% increase in the Total Annual Cost. AHC not = to AOC. Reord
not affect by change in order quantity.
ue Ltd. EOQ Table
1 2 3 4 5 6 7 8 9 10
$10,000 $5,000 $3,333 $2,500 $2,000 $1,667 $1,429 $1,250 $1,111 $1,000
$5,000 $2,500 $1,667 $1,250 $1,000 $833 $714 $625 $556 $500
$625 $313 $208 $156 $125 $104 $89 $78 $69 $63
$25 $50 $75 $100 $125 $150 $175 $200 $225 $250
$650 $363 $283 $256 $250 $254 $264 $278 $294 $313
Optimal

f orders per year 5 orders per year

$2,000 per order
f days' supply per order 73 days' supply per order (365/5)
f units per order 8 units per order (40/5)

AHC not = to AOC. Reorder point

Lead Time 6 days Annual demand
Average Usage 50 motors per day Ordering costs
Annual Carrying Cost 10 per motor Unit cost
Stockout Cost 50 per motor Working days
Number of Order per year 5 per year

Lead time demand 300

ROP 500

Use during the reorder point Number of usage Probability

150 3 0.03
200 4 0.04
250 6 0.06
300 68 0.068
350 9 0.09
400 7 0.07
450 3 0.03
TOTAL 100 1

COST OF BEING OUT OF STOCK

ROP Safety Stock Number short Expect annual cost (EAC)
300 0 50 1125
100 1750
150 1125
350 50 50 875
100 750
400 100 50 375
450 150 0 0

COST OF SAFETY STOCK

COST OF BEING OUT OF
ROP Safety Stock STOCK Annual carrying cost
300 0 4000 0
350 50 1625 500
400 100 375 1000
450 150 0 1500

MIN
Total Annual Stockout cost

4000

1625
375
0

Total Cost/year Decision SS

4000 0 0
2125 0 0
1375 400 100
1500 0 0

1375
Ben’s Muffler Repair advertises that it is able to replace a car muffler on the same day a customer brings a car into
has found that for LN-70 mufflers, the optimal reorder quantity is 30 mufflers; he orders LN-70 mufflers 10 times a
away, lead time for his orders is 30 working days, a period of time in which Ben on the average sells 30 LN-70 muffl
32 LN-70s, 5 occasions when he sold 35, and only 1 when he sold 36 during the 30-day order period. On each of th
safety stock.

Lead Time 30 days

Average Usage 1 muffler per day
Annual Carrying Cost 18 per muffler
Stockout Cost 100 per muffler
Number of Order per year 10 per year

Lead time demand 30

ROP 30

Use during the reorder point Number of usage Probability

30 84 0.84
32 10 0.10
35 5 0.05
36 1 0.01
TOTAL 100 1

COST OF BEING OUT OF STOCK

ROP Safety Stock Number short
30 0 2
5
6
32 2 3
4
35 5 1
36 6 0

COST OF SAFETY STOCK

COST OF BEING
ROP Safety Stock OUT OF STOCK
30 0 510
32 2 190
35 5 10
36 6 0
on the same day a customer brings a car into the shop. If for any reason Ben cannot keep this promise, he pays the customer 100 dollars.
mufflers; he orders LN-70 mufflers 10 times a year. As LN-70 mufflers have to be ordered from a manufacturer located a considerable dist
which Ben on the average sells 30 LN-70 mufflers. During the past 10 years, 100 orders were placed. There were 10 occasions when Ben so
during the 30-day order period. On each of the other 84 occasions, he sold 30 or fewer. It costs Ben 18 dollars a year to hold one LN-70 in

Annual demand
Ordering costs
Unit cost
Working days

G OUT OF STOCK
Expect annual cost (EAC) Total Annual Stockout cost
200
250
60 510
150
40 190
10 10
0 0

COST OF SAFETY STOCK

Annual carrying cost Total Cost/year Decision SS

0 510 0 0
36 226 0 0
90 100 35 5
108 108 0 0

MIN 100
 4 pts How much is the total expected annual cost of being out of stock if the ROP is at 3
he pays the customer 100 dollars. Ben 510 per year
acturer located a considerable distance
ere were 10 occasions when Ben sold
dollars a year to hold one LN-70 in 4 pts How much is the total annual cost (expected annual cost of being out of stock + an
108 per year
note: round your final answer to the nearest whole number

4 pts How much is the total expected annual cost of being out of stock if the ROP is at 3
190 per year
note: round your final answer to the nearest whole number

4 pts How much is the total annual cost (expected annual cost of being out of stock + an
226 per year
note: round your final answer to the nearest whole number

4 pts How much is the total expected annual cost of being out of stock if the ROP
0 per year
note: round your final answer to the nearest whole number

4 pts How much is the total annual cost (expected annual cost of being out of sto
100 per year
note: round your final answer to the nearest whole number

4pts How much is the total expected annual cost of being out of stock if the ROP is at 3
10 per year
note: round your final answer to the nearest whole number

4pts How much is the total annual cost (expected annual cost of being out of stock + an
510 per year
note: round your final answer to the nearest whole number
 of stock if the ROP is at 30 units (30 units + 0 safety stock)?

of being out of stock + annual carrying cost) if the ROP is at 36 units (30 units + 6 safety stocks)?

of stock if the ROP is at 32 units (30 units + 2 safety stocks)

of being out of stock + annual carrying cost) if the ROP is at 32 units (30 units + 2 safety stocks)?

g out of stock if the ROP is at 36 units (30 units + 6 safety stocks)?

cost of being out of stock + annual carrying cost) if the ROP is at 35 units (30 units + 5 safety stocks)?

of stock if the ROP is at 35 units (30 units + 5 safety stocks)?

of being out of stock + annual carrying cost) if the ROP is at 30 units (30 units + 0 safety stocks)?
 Morgan Furniture requires 576,000 board feet of wood per year. The cost per delivery is 112 pesos and cost the co

Annual Demand 576,000 board feet of wood per year

Cost of wood 0.70 per board feet
Ordering Cost 112
Carrying cost 0.18

No. of orders per year 1 2 3 4

value per order 403,200 201,600 134,400 100,800
average inventory 201,600 100,800 67,200 50,400
carrying costs 36,288 18,144 12,096 9,072
ordering costs 112 224 336 448
Total costs/year 36,400 18,368 12,432 9,520

Economic Order Quantities

Optimal number of board per feet per order 32,000
Optimal number of orders per year 18
Minimum Inventory Cost 4,032
Optimal value per order 22,400
Optimal number of days' supply per order 20

3 pts. Determine the optimal number of board feet per order 32,000
note: round your answer to the nearest whole number and do not use comma or space

Determine the minimum inventory cost for the Morgan inventory policy. 4,032
note: round your answer to the nearest whole number and do not use comma or space

3 pts. Determine the optimal number of orders per year 18

note: round your answer to the nearest whole number

3 pts. Determine the optimal value per order 22,400

note: round your answer to the nearest whole number and do not use comma or space

Determine the optimal number of day's supply per order (cycle time) 20
note: round your answer to the nearest whole number and do not use comma or space
s 112 pesos and cost the cost of the wood is 0.70 pesos per board feet. It is estimated that the carrying cost is 18% of the average invento

5 6 7 8 9 10 11 12 13 14
80,640 67,200 57,600 50,400 44,800 40,320 36,655 33,600 31,015 28,800
40,320 33,600 28,800 25,200 22,400 20,160 18,327 16,800 15,508 14,400
7,258 6,048 5,184 4,536 4,032 3,629 3,299 3,024 2,791 2,592
560 672 784 896 1,008 1,120 1,232 1,344 1,456 1,568
7,818 6,720 5,968 5,432 5,040 4,749 4,531 4,368 4,247 4,160

Formula Method:
Ch 0.126
Q* 32,000
Total amount cost
(Q*Ch)/2 2,016
DCo/Q* 2,016
Minimum Inventory Cost 4,032

Optimal number of days' supply per order

Q*/D 20
SQRT(2Co/AC) 20
% of the average inventory.

15 16 17 18 19 20 21 22 23 24
26,880 25,200 23,718 22,400 21,221 20,160 19,200 18,327 17,530 16,800
13,440 12,600 11,859 11,200 10,611 10,080 9,600 9,164 8,765 8,400
2,419 2,268 2,135 2,016 1,910 1,814 1,728 1,649 1,578 1,512
1,680 1,792 1,904 2,016 2,128 2,240 2,352 2,464 2,576 2,688
4,099 4,060 4,039 4,032 4,038 4,054 4,080 4,113 4,154 4,200
 Demand for STICK disposable razors at Burnight Drugstore averages seven packages per day. The razors cost Burnig
per package and sell for 1.49 dollars. Burnight uses a 20% annual holding cost rate and estimates the cost to place
additional razors at 25 dollars. Burnight is open 365 days a year and desires a safety stock of 15 packages. The lead
delivery is five days.

Average Usage 7
Annual Demand 2,555 Sells for 1.49
Cost 80% Working days per year 365
Ordering Cost 25
Carrying cost 20% 16%
Lead time 5
Safety Sock 15

No. of orders per year 1 2 3 4 5 6

value per order 2,044 1,022 681 511 409 341
average inventory 1,022 511 341 256 204 170
carrying costs 204 102 68 51 41 34
ordering costs 25 50 75 100 125 150
Total costs/year 229.40 152.20 143.13 151.10 165.88 184.07

Economic Order Quantities Formula Method:

Optimal number of units per order 894 Ch
Optimal number of orders per year 3 Q*
Minimum Inventory Cost 143 Total amount cost
Optimal number of days' supply per order 128 (Q*Ch)/2
Reorder point 50 DCo/Q*
Minimum Inventory Cost

Optimal number of days' supply per orde

3 pts Determine the reorder point (lead time demand + safety stock)
note: round your answer to the nearest whole number

3 pts Determine the optimal number of units per order.

note: round your answer to the nearest whole number

3pts. Using the EOQ table, determine the minimum inventory cost (carrying cost + ordering cost)
note: round your answer to the nearest whole number

3pts. Determine the optimal number of orders per year

3pts. Determine the optimal number of days' supply per oder (cycle time)
note: round your answer to the nearest whole number
per day. The razors cost Burnight 0.80 dollar
d estimates the cost to place an order for
tock of 15 packages. The lead time for

7 8 9 10 11 12 13 14 15 16
292 256 227 204 186 170 157 146 136 128
146 128 114 102 93 85 79 73 68 64
29 26 23 20 19 17 16 15 14 13
175 200 225 250 275 300 325 350 375 400
204.20 225.55 247.71 270.44 293.58 317.03 340.72 364.60 388.63 412.78

0.160
894

71
71
nventory Cost 143

mber of days' supply per order

Q*/D 128
SQRT(2Co/AC) 128

50

894

143

3
128
17 18 19 20 21 22 23 24
120 114 108 102 97 93 89 85
60 57 54 51 49 46 44 43
12 11 11 10 10 9 9 9
425 450 475 500 525 550 575 600
437.02 461.36 485.76 510.22 534.73 559.29 583.89 608.52
ABC Co. is a manufacturing company that sells beverages. It is estimated that the annual demand for their tropical
product is 3600 cases. The cost of the tropical fruit soda drink is 3 dollars per case. The ABC Co. accountant has det
the ordering and carrying costs for this product are 20 dollars and 25%, respectively. ABC Co. operates for 250 days
it takes 5 days for ordered items to arrived for inventory replenishment.

Annual Demand 3,600

Cost 3
Ordering Cost 20
Carrying cost 25%
Working days per year 250
Lead time 5

No. of orders per year 1 2 3 4 5 6

value per order 10,800 5,400 3,600 2,700 2,160 1,800
average inventory 5,400 2,700 1,800 1,350 1,080 900
carrying costs 1,350 675 450 338 270 225
ordering costs 20 40 60 80 100 120
Total costs/year 1,370.00 715.00 510.00 417.50 370.00 345.00

Economic Order Quantities Formula Method:

Optimal number cases per order 438.18 Ch
Optimal number of orders per year 8 Q*
Minimum Inventory Cost 329 Total amount cost
Optimal value per order 1,314.53 (Q*Ch)/2
DCo/Q*
Minimum Inventory Cost

3pts Determine the optimal number cases per order

note: round your answer to the nearest whole number

3pts Determine the optimal number of orders per year

note: round your answer to the nearest whole number

3pts. Using MS Excel, determine the minimum inventory cost in the EOQ table.
note: round your answer to two decimal places and do not use comma or space

3pts. Using the ECQ formula, determine the optimal value per order
note: round your answer to two decimal places and do not use comma or space
nual demand for their tropical fruit soda drink
he ABC Co. accountant has determined that
ABC Co. operates for 250 days in a year and

7 8 9 10
1,543 1,350 1,200 1,080
771 675 600 540
193 169 150 135
140 160 180 200
332.86 328.75 330.00 335.00

0.750
438

164
164
nventory Cost 328.63

438

in the EOQ table. 328.63

ot use comma or space

ot use comma or space 1314.53