Name : Karina Olivia

NIM : 2602065105
Class : LA53

BANTAM has the following data : BANTAM orders goods every month. The price of goods purchased is USD
5,000 / unit. For each order, BANTAM must pay a fee of USD 30,000. For insurance, inventory handling and
other costs, BANTAM issues USD 1,000 annually. BANTAM is able to sell as many as 50,000 units annually.
The expected ROI is 20%.

D = 50,000 units
P = USD $30,000
C= $ 1,000.00 1000 + (20% x 5000)
ROI = 20%

a. Calculate EOQ
EOQ = √(2𝐷𝑃/
𝐶)

=√((2 𝑥 50.000 𝑥
($30.000))/$1.000)

= √($3.000.000.000
/$1.000)

=
√$3.000.000
= 1732.05
EOQ = 1733 units

b. Calculate the annual relevant ordering cost

Annual relevant ordering cost = D
x P
Q
= $ 50,000
x $ 30,000
1733
= $ 29 x $ 30,000
= $ 865,551.07

c. Calculate annual relevant carrying cost

Annual relevant carrying cost = Q
x C
2
= 1733
x $ 1,000
2
= 866.5 x $ 1,000
= $ 866,500
d. Calculate reorder point
Reorder point = Number of units sold per unit of time x Purchase order lead time

Number of units sold per unit of time

= 50.000 units / 365 days
= 137 units per week

Purchase order lead time = 30 days

Reorder point = Number of units sold per unit of time x Purchase order lead time
= 137 units x 30 days
= 4110
(in units)
OR

Purchase order lead time = 31 days

Reorder point = Number of units sold per unit of time x Purchase order lead time
= 137 units x 31 days
= 4247
(in units)
Madre Corporation purchases inventory every 3 weeks. The demand for goods made by Madrid
Corporation during a year is 35,000. The return on investment expected by Madrid Corporation is 20%.
The price of goods purchased is USD 900 / unit. In addition, Madrid Corporation also incurs a cost per
order of USD 25,500 and insurance, inventory handling and other costs of USD 950/year.

D = 35,000 units
P = USD $25,500
C= $ 950
ROI = 20%

a. Calculate EOQ
EOQ = √(2𝐷𝑃/
𝐶)

=√((2 𝑥 35.000 𝑥
($25.500))/$950)

= √($1.785.000.000
/$950)

=
√$1.878.947
= 1370.75
EOQ = 1371 units

b. Calculate the annual relevant ordering cost

Annual relevant ordering D
x P
Q
= $ 35,000
x $ 25,500
1371
= $ 26 x $ 25,500
= $ 650,984.68

c. Calculate annual relevant carrying cost

Annual relevant carrying Q
x C
2
= 1371
x $ 950
2
= 685.5 x $ 950
= $ 651,225

d. Calculate reorder point

Reorder point = Number of units sold per unit of time x Purchase order lead time
 Number of units sold per unit of time
= 35.000 units / 364 days
= 96.15 units per week

Purchase order lead time = 21 days

Reorder point = Number of units sold per unit of time x Purchase order lead time
= 96 units x 21 days
= 2019
(in units)
OR

Number of units sold per unit of time

= 35.000 units / 365 days
= 95.89 units per week

Purchase order lead time = 21 days

Reorder point = Number of units sold per unit of time x Purchase order lead time
= 96 units x 21 days
= 2014
(in units)