Name: TAGUN, James Gilson M.

Date: June 14, 2024

Year/Course: 3rd Year – BSIE Instructor: Ms. Vanessa Ici

Operations Management
Inventory Management Lecture Activity

The EOQ formula is given by:

where:
- (D) is the annual demand.
- (S) is the ordering cost per order.
- (H) is the carrying cost per unit per year.

Problem 1:
A company sells a particular product with a steady demand rate of 200 units per
months. The ordering cost per order is $100 , and the carrying cost per unit per year is $2. The
company operates the 12 months in a year. Calculate the economic order quantity (EOQ) for
this product.

Given:
 Monthly demand (d) = 200 units
 Annual demand (D) = 200 units/month * 12 months/year = 2400 units/year
 Ordering cost per order (S) = $100 per year
 Carrying cost per unit per year (H) = $2

EOQ = √ 2 x 24002 x 1000 = 489.9 / 490 units

Therefore economic order quantity (ECQ) for this product is approximately 490 Units.

Problem 2:
A retail clothing shop carries in a line of men’s jeans , and the shop sells 1,000 pairs
of jeans each year . It cost the company $5 per year to hold a pair jeans in inventory , and the
fixed cost to place an order is $2.

Given:
  Annual demand (D) = 1000 pairs of jeans
 Ordering cost per order (S) = $2 per order
 Carrying cost per unit per year (H) = $5

EOQ =
√ 2 x 10005 x 2 = 28.28 / 28 pairs of jeans

Therefore in order minimize the overall cost of acquiring and maintaining inventory, the
store should order 28 pairs of jeans every single time.