CEBU ROOSEVELT MEMORIAL COLLEGES

Bogo Cebu

MANAGEMENT SCIENCE
Name _AMALIA T. YLANAN
Quiz – January 6, 2021
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Problem 1: Economic Order Quantity (EOQ)
Data follows:

Economic Order Quantity

Annual Demand 140,000
Ordering Cost (Setup Cost) PHP 45.00
Annual Inventory Holding Cost Rate 20%
Cost per Unit PHP 12.00
Working Days per Year 256
Lead Time (Days) 4

Compute:
Economic Order Quantity = 2,291.287847 units
Annual Inventory Holding Cost = 2,749.55
Annual Ordering Cost = 2,749.54

Total Annual Cost = 5,499.09

Maximum Inventory Level = 2,291.287847 units

Average Inventory Level = 1,145.645

Reorder Point = 273.4375

Number of Orders Per Year = 61.10
Cycle/Lead Time (Days = 4.1898527
Reorder Point = 273.4375
oOo
 1. Economic Order Quantity (EOQ)

√ 2 x 140000 x 45
20%x 12
= 12,600,000/ 2.4

= √ 5,250,000

= 2,291.287847 units

2. 2. Annual Inventory Holding Cost

Q
xH
2
= 2,291.287847 /2 X 2.4
= 2,749.55
3. Annual Ordering/Setup Cost
140,000/2,291.29 X 45
= 2,749.54

4. Total Annual Cost

2,749.55+2,749.54= 5,499.09

5. Maximum Inventory Level

2,291.287847 units
6. Average Inventory Level
2,291.29 /2 = 1,145.645

7. Number of Orders Per Year

140,000/2,291.29 = 61.10

8. Cycle/Lead Time (Days

256/61.10 = 4.1898527

9. REORDER POINT
140,000/256X2
= 273.4375