KRISTINE SANTANDER

FRANCES MAE MAGLINTE

RHENA MORALA
ALMERA POSA
JOJO ESPINA
PROBLEM SOLVING:
1. The Dine Corporation is a user of brass couplings. The firm operates 220
days a year and uses the couplings at a steady rate of 50 per day. Couplings
can be produced at a rate of 200 per day. Annual storage cost is P2 per
coupling, and setup cost is P70 per order.

a. Determine the economic order quantity

EOQ= 2 DS
√ H

EOQ=
√ 2(11,000)(70)
2

EOQ=√ 770,000
EOQ= 877.4964387 EOQ= 877.50 units

b. How many order runs will there be in a year?

D
N= Q ¿
¿
11,000
N= 877.50

N= 12.53561254 N= 12.54 order runs

c. What is the length of order cycle per year?
Number of Working Days per Year
T= N
200
T= 12.54

T= 17.54385965
T≈ 18 days

d. Compute the total cost per year.

D∗S Q∗H
N= Q + 2

11,000∗70 877.50∗2
N= 877.50 + 2

N= 1,754.992877
 2. A small manufacturing firm uses roughly 3,400 kilograms of chemical dye a
year. Currently, the firm purchases 300 kilograms per order and pays P3 per
kilogram. The supplier has just announced that orders of 1,000 kilograms or
more will be filled at a price of P2 per kilogram. The manufacturing firm
incurs a cost of P100 each time it submits an order and assigns an annual
holding cost of 17 percent of the purchase price per kilogram.  Should the
firm change its current ordering quantity and avail of the supplier’s offer?
Support your answer.

2 SD √2(100)(3400)
EOQ = √ =
H 0.51

Based on the solution above the Economic Order Quantity is 1155.

TC (Q = 1155, P = 3) = .51(1155)/2 + 100(3400)/1155 + 3(3400)
TC = 294.5 + 294.5 + 10200 = Php 10,789
TC (Q = 1155, P = 2) = .51(1155)/2 + 100(3400)/1155 + 2(3400)
TC = 294.5 + 294.5 + 6800 = Php 7,389
The firm adjust its current order quantity to take advantage of the supplier’s offer.
It indicates that the net discount saving is positive which means that the cost per
order is minimized.