Sept 2011 (EOQ & Stock Level)

D.
Annual demand of flour (D) = 480,000 x 0.05
= 24,000 kg

Ordering cost per order (Co) = RM5

Storage cost per kg (Cs) = RM1.50

i) _______
EOQ (flour) = 2CoD
Cs
________________
= 2 x RM5 x 24,000
RM1.50
= 400 kg

ii) Reorder level (ROL)

= 100 x 6
= 600 kg

Max. stock level

= 600 + 400 – (50 x 2)
= 600 + 400 – 100
= 900 kg

iii) Min. stock level

= 600 – [(50 + 100)/2 x (2 +6)/2 ]
= 600 – (75 x 4)
= 600 – 300
= 300 kg