Vixen Aaron M.

Enriquez Management Science

BSA 2-1

ACTIVITY 2 – INVENTORY MODELS (ANSWERS)

Requirements:

1. Economic Order Quantity (EOQ)

2 x D x OC
EOQ¿ √
CC

2 x 320,000 x 80
EOQ¿ √
20

EOQ = 1,600 units

This means that Hyzel Manufacturing Company shall place 1,600 units of the product every time it
makes an order.

2. Total Carrying Cost (TCC)

TCC = AI x CC
EOQ
AI =
2
1,600
AI =
2
AI = 800
TCC = 800 x 20
TCC = Php 16,000
3. Total Ordering Cost (TOC)
TOC = (D ÷ EOQ) (OC)
TOC = (320,000 ÷ 1,600) (80)
TOC = 200 x 80
TOC = Php 16,000
4. Total Annual Inventory Cost (TAIC)
TAIC = TCC + TOC
TAIC = Php 16,000 + Php 16,000
TAIC = Php 32,000
5. Average Usage Per Day
Vixen Aaron M. Enriquez Management Science
BSA 2-1

D
AU/D =
WD/Y
320,000
AU/D =
250
AUD = 1,280 units per day
6. Reorder Point (ROP)
ROP = ALTU + SS
ALTU = LT x (AU/D)
ALTU = 5 x 1,280
ALTU = 6,400
ROP = 6,400 + 6,000
ROP = 12,400 units
7. Cycle Time (CT)
WD
x EOQ
CT = Y
D
250 x 1,600
CT =
320,000
CT = 1.25
8. Total Number of Orders in a Year (TNO/Y)
D
TNO/Y =
EOQ
320,000
TNO/Y =
1,600
TNO/Y = 200 orders placed in a year