A = 300000 units

o = 1500 Rs.
Price = 75 Rs./ unit
c = 20 % of Rs. 75 = 15 Rs./unit/year
Purchase quantity = 100000 units/ order
Safety stock = 50000 units Lead time = 15
No. of working days per year = 230
a) The number of purchases during a year = A / Purchase quantity = 300000/100000=
b) Max. inventory = Purchase quantity per order + Safety stock = 150000 Min. inventory = Safety stock =
Average inventory level (including the safety stock) = (Max. inventory + Min. inventory) / 2 =
c) Inventory turnover = A / Average inventory = 3 times per year
d) Average days of supply in inventory (known as cover-time) = (Average inventory / A) x No. of working days per year =
e) Reorder point = Rate of consumption of inventory (units per day) x Lead time + Safety stock
= (A / No. of working days per annum) x Lead time + Safety stock = 69565.22
f) Total inventory cost = Total o.c. + Total c.c
Total o.c. = No. of orders (purchases) during the year x o = Rs. 4500
Total c.c. = Average inventory x c = Rs. 1500000
Rs. 1504500 Total inventory cost = Total o.c. + Total c.c
Rs. 6541.304 Total inventory cost per working day = Total inventory cost/ No. of working days
g) EOQ = Q = (2Ao / c)
Q
2
= 60000000
Q = 7745.967
h) For EOQ, Total inventory cost = Total o.c. + Total c.c + c.c. of safety stock
o.c. = (A/Q) x o = 58094.75
c.c. = o.c. = 58094.75
c.c. of safety stock = New level of safety stock x c = 75000
Rs. 191189.5 Total inventory cost
Rs. 831.2587 Total inventory cost per working day = Total inventory cost/ No. of working days
days
3
Min. inventory = Safety stock = 50000
100000 units
(Average inventory / A) x No. of working days per year = 76.66667 working days
units
Total inventory cost = Total o.c. + Total c.c
Total inventory cost per working day = Total inventory cost/ No. of working days
New level of safety stock = 5000
Total inventory cost per working day = Total inventory cost/ No. of working days