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Tagun Jamesgilson Omlec Act.
Tagun Jamesgilson Omlec Act.
Operations Management
Inventory Management Lecture Activity
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
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.