Inventory Valuation:

1. A firm’s inventory planning period is one year. Its inventory requirement

for this period is 1600 units. Assume that its acquisition costs are Rs 50
per order. The carrying cost per unit is expected to be Re I per unit per
year for an item.
The firm can procure inventories in various lots as follows:
a. 1600 units
b. 800 units
c. 400 units
d. 200 units
e. 100 units.
Which of these order quantities is an economic order quantity

2. Economic Enterprises requires 90,000 units of certain item annually. The

cost per unit is Rs 3. The cost per purchase order is Rs 300 and the
inventory carrying cost is Rs 6 per unit per year.
a. What is EOQ?
b. What should the firm do if the suppliers offers discount as detailed
below:
Order Quantity Discount
4500-5999 2 percent
6000 and above. 3 percent

3. The Peekay Company has been buying a given order in a lot size of 1200
units which is a six month supply, the cost per unit is Rs 12, order cost is
Rs 8 per order and carrying cost is 25 percent. You are required to
calculate savings per year by buying in EOQ.

4. Two components, A and B are used as follows:

Normal usage 50 units per week each Minimum usage 25 units per week
each
Maximum usage 75 units per week each
Re order quantity
A: 300 units
B: 500 units
Reorder period
A: 4 to 6 weeks
B: 2 to 4 weeks
Calculated (a) Re-order level (b) Minimum level (c) Maximum level (d)
Average stock level