Assignment (Inventory management)

1. Calculate Economic Order Quantity (EOQ) from the following:

Annual consumption 6,000 units
Cost of ordering Rs. 60
Carrying costs Rs. 2

2. From the following particulars, calculate the Economic Order Quantity (EOQ):
Annual requirements 1,600 units Cost of materials per
units Rs. 40
Cost of placing and receiving one order: Rs. 50 Annual carrying cost for inventory
value 10%
3. A company makes bicycles. It produces 450 bicycles a month. It buys the tires for bicycles
from a supplier at a cost of $20 per tire. The company’s inventory carrying cost is estimated to
be 15% of cost and the ordering is $50 per order. Calculate the EOQ
What is the number of orders per year?
Compute the average annual ordering cost
Compute the average inventory
Compute the total cost.
4. Explain in detail the costs involved in EOQ.

5. Mr. Venkat , MD of M/s. Hot & Cold Foods Pvt. Ltd. is not happy recently on the
performance of materials department in general and inventory in particular of his organization.
He has given nod to his Materials Manager Mr. Purushothaman to appoint an Inventory Control
Officer to revamp the department.
MM, Mr. Purushothaman appointed Mr. Dheeraj as Inventory Controller to streamline the given
assignment. He was given all the required data to analyse and take remedial action.
Based on the above inputs you are asked to find out the answers for following questions :
a. Identify H, M & L classified items with percentage (L equals Rs. 999/- & less, M equals
values between Rs.1000/- and Rs. 4999/- and H equals to Rs. 5000/- and more).
b. Identify FSN items and find out how many numbers each class has? How many number of
items Mr. Dheeraj recommended for speedy disposal?
c. Identify A, B and C items with percentage? What % of items requires moderate control? What
percentage of items need very strict consumption control basis? Hardly any check is required for
what percentage of items?

6. An item is used at a uniform rate of 50,000 units per year. No shortage is allowed and delivery
is at an infinite rate. The ordering, receiving and hauling cost is Rs. 13 per order, while
inspection cost is Rs. 12 per order. Interest costs Rs. 0.056 and deterioration and obsolescence
cost Rs. 0.004 respectively per year for each item actually held in inventory plus Rs. 0.02 per
year per unit based on the maximum number of units in inventory. Calculate the EOQ. If lead
time is 20 days, frnd re-order level.