PROBLEM 21-1A_____________________________________________________________

The Cloth Centre buys and sells fabrics to a wide range of industrial and consumer users. One of
the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The
supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is
necessary because the supplier has a track record of delivering high-quality merchandise. The
purchasing officer of the Cloth Centre has collected the following information:

Annual demand for denim clothe 20,000 yards

Ordering costs per purchase order £160
Carrying costs per year 20% of purchase cost
Safety stock requirements None
Cost of denim clothe £8 per yard

The purchasing lead-time is two weeks. The Cloth Centre is open 250 days a year (50 weeks for
five days a week).

Required:

1. Calculate the EOQ for denim cloth.

2. Calculate the number of orders that will be placed each year.

3. Calculate the reorder point for denim cloth.

Instructions:

1. Review the printed template called Problem 21-1 that follows these instructions. Most of the
problem data have been entered for you in the data input section of the spreadsheet.

2. There are 6 FORMULAS in the template that you need to provide to complete your analysis.
Using the spaces provided below, write the formulas where requested in the template.

FORMULA 1 _________________ FORMULA 4 _________________

FORMULA 2 _________________ FORMULA 5 _________________

FORMULA 3 _________________ FORMULA 6 _________________

3. Click the Lotus or Excel icon from the program manager screen to start the spreadsheet
program. Click on the Open File SmartIcon/Button to retrieve the template for the problem.
Then enter the 6 FORMULAS where indicated on the template.

4. Click the Save File SmartIcon/Button to save your work.

PROBLEM 21-1A
Continued
5. Click the Print SmartIcon to display the Print dialog box. Click the OK button to print
your work.

For Excel users, click the Print Button to print your work.