CLASS ASSIGNMENT- INVENTORY MANAGEMENT

EOQ PROBLEM 1
Ansan City stocks and sells a particular brand of laptop. It costs the firm $625 each time it
places an order with the manufacturer for the laptops. The cost of carrying one laptop in
inventory for a year is $130. The store manager estimates that the total annual demand for the
laptops will be 1500 units, with a constant demand rate throughout the year. Orders are
received within minutes after placement from a local warehouse maintained by the
manufacturer. The store is open for the business everyday of the year except for Christmas
Day. Determine the following:
1. Optimal order quantity per order
2. Minimum total annual inventory costs
3. Number of orders per year
4. Time between orders per year

EOQ PROBLEM 2
The Food Place Supermarket stocks Munchin Cookies. Demand for Munchkins is 5000 boxes
per year (365 days) . It costs the store $80 per order of Munchkins and it costs $0.50 per bos
per year to keep the cookies in stock. Once an order for Munchkins is placed, it takes 4 days
to receive an order from food distributor. Determine:
1. Optimal order size
2. Minimum total annual inventory cost
3. Reorder point

EOQ PROBLEM 3

Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company
chain with a central inventory operation. Thomas’s fastest-moving inventory item has a
demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost
is $10 per unit per year. The average ordering cost is $30 per order. It takes about 5 days for
an order to arrive, and the daily demand is 24 units. (This is a corporate operation, and there
are 250 working days per year). Determine:
1. Order quantity at which total inventory costs for ordering and holding is minimum?
2. Evaluate total annual ordering and holding costs and gap between two consecutive
orders.
Solution1.

a.

b.

c.

d.

Solution 2

a.

b.

c.