Name PATRICIA MARIE L.

ABALOS
Subject OPERATION MANAGEMENT
Date JUNE 24, 2022

CASE PROBLEM
Inventory Management

ABC company has the following inventory data:

Per unit cost = $2 per unit

Annual requirement = 50,000 units
Ordering cost = $5 per order
Carrying cost = 10% of per-unit cost

1. What is the most economical number of units to order? 1,581 units

2. How many orders should be placed in a year? 32 orders
3. How often should an order be placed in a year? 11 days

Show your computations.

1. EOQ=
√ 2× AR ×OC
CC

=
√ 2× 50,000× 5
2 ×10 %

=
√ 500,000
0.2

= √ 2,500,000

= 1,581 units

2. No of Orders= AR / EOQ = 50,000 / 1,581 = 31.625 or 32 orders

3. Frequency of orders = No. of days in 1 year / No. of orders
FO = 360 / 32 = 11 days