Q1An auto-component manufacturer requires a certain steel forging in large quantities The annual requirement is 40

each costing Rs 450 The ordering cost is Rs 600 per order and the carry cost is Rs 100 per unit per year

a)     What is the optimal order quantity?

b)     How frequently should the manufacturer place the order with the supplier?
c)     Compute the total ordering cost and total carrying cost? Do you notice anything?

Requirement 40000
Price per unit 450
Co 600
Cc 100
EOQ 692.8203

Optimal no of orders 57.73503 58

TC 69282.03
Total Cc 34641.02
Total ordering cost 34641.02
he annual requirement is 40,000 pieces,
t is Rs 100 per unit per year

annual 40000
unit price 450 EoQ 692.8203
annual 40000 Co 600 opti 57.73503
unit 450 Cc 100 time 0.017321
Co 600 6.321985
Cc 100 TC 69282.03

EOQ 692.8203 57.73503 58

CI 34641.02
CO 34641.02
TC 69282.03
58
 Q2 Wohl’s Discount Store stocks toy race cars. Recently, the store has been given a quantity
discount scheduled for these cars. This quantity schedule was shown in the following table.

Discount Discount Discount

Discount%
number Quantity Price

1 0 to 999 no discount $5.00

2 1000 to 1999 4 $4.80
3 2000 and over 5 $4.75

The normal cost for the toy race cars is $ 5.00. For orders between 1000 and 1999 units, the unit co
drops to $ 4.80; for orders of 2000 or more units, the unit cost is only $4.75. Further more orderin
cost is $49.00 per order, annual demand is 5000 race cars and inventory carrying charge as a perce
of cost is 20%. What order quantity will minimize the total inventory cost.

Annual demand 5000

Ordering cost 49
Inventory cost 0.2

EOQ(1) 700
714.4345083 adjusted to 1000
718.1848465 adjusted to 2000

TC(700) 25700
TC(1000) 24725
TC(2000) 24822.5

Least cost is for quantity = 1000 hence that is optimum order qty
e has been given a quantity
wn in the following table.

Co 49
00 and 1999 units, the unit cost Annual de 5000
$4.75. Further more ordering Cc 20%
ry carrying charge as a percent EOQ 700 Annual
al inventory cost. EOQ 714.4345 1000 Co
EOQ 718.1848 2000 Cc

TC(700) 25700
TC(1000) 24725 EOQ
TC(2000) 24822.5

TC(700)
TC(1000)
TC(2000)
 5000
49
9.8

700
714.4345 1000
718.1848 2000

25700
24725
 Q2 Annual Demand for an item is 4800 units. Ordering cost is Rs 500 per order. Inventory
carrying cost is 24 % of the purchase price per unit, per year. The price breaks are shown as

Price
Quantity
(Rs)
0 ≤ Q1<1200 10
1200≤ Q2<2000 9
2000≤ Q3 8

a)     Find the optimal order size

b)     If the order cost is changed to Rs 300 per order. Find the optimal order size.

a
b
annual 4800
Co 500
Cc 24%
EOQ 1414.214 1000
EOQ 1490.712 1200
1581.139 2000