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Inventory Control Practice Problems (To Be Submitted As Assignment On or Before 02-12-2019)

This document contains 11 inventory control practice problems involving calculating economic order quantities (EOQ) and total annual inventory costs given information about annual demand, ordering costs, carrying costs, unit costs, and sometimes quantity discounts. The problems require determining optimal order quantities, number of orders per year, order cycle lengths, and total annual costs.

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93 views2 pages

Inventory Control Practice Problems (To Be Submitted As Assignment On or Before 02-12-2019)

This document contains 11 inventory control practice problems involving calculating economic order quantities (EOQ) and total annual inventory costs given information about annual demand, ordering costs, carrying costs, unit costs, and sometimes quantity discounts. The problems require determining optimal order quantities, number of orders per year, order cycle lengths, and total annual costs.

Uploaded by

syedqutub16
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Inventory control practice problems

(To be submitted as assignment on or before 02-12-2019)

1. We need 1,000 electric drills per year. The ordering cost for these is $100 per order
and the carrying cost is assumed to be 40% of the per unit cost. In orders of less than
120, drills cost $78; for orders of 120 or more, the cost drops to $50 per unit.Should
we take advantage of the quantity discount?
2. 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.
a.Calculate the EOQ.
b.What is the number of orders per year?
c.Compute the total cost.

3. Piddling Manufacturing assembles security monitors. It purchases 3,600 black-and-white


cathode ray tubes a year at $65 each. Ordering costs are $31, and annual carrying costs are 20
percent of the purchase price. Compute the optimal quantity and the total annual cost of
ordering and carrying the inventory.

4. A local distributor for a national tire company expects to sell approximately 9,000 steel-
belted radial tires of a certain size and tread design next year. Annual carrying cost is $16 per
tire, and ordering cost is $75. The distributor operates 300 days a year.
a. What is the EOQ?
b. How many times per year does the store reorder?
c. What is the length of an order cycle?
d. What is the total annual cost if the EOQ quantity is ordered?

5. Surge Electric uses 4,000 toggle switches a year. Switches are priced as follows: 1 to 499,
90 cents each; 500 to 999, 85 cents each; and 1,000 or more, 80 cents each. It costs
approximately $30 to prepare an order and receive it, and carrying costs are 40 percent of
purchase price per unit on an annual basis. Determine the optimal order quantity and the total
annual cost.

6. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips are used
at a steady rate during the 240 days a year that the plant operates. Annual holding cost is $3
per chip, and ordering cost is $120. Determine
a. The optimal order quantity.
b. The number of workdays in an order cycle.
c. Total annual costs

7. A small manufacturing firm uses roughly 3,400 pounds of chemical dye a year. Currently
the firm purchases 300 pounds per order and pays $3 per pound. The supplier has just
announced that orders of 1,000 pounds or more will be filled at a price of $2 per pound. The
manufacturing firm incurs a cost of $100 each time it submits an order and assigns an annual
holding cost of 17 percent of the purchase price per pound.
a. Determine the order size that will minimize the total cost.
8. The XYZ Ltd. carries a wide assortment of items for its customers. One of its popular
items has annual demand of 8000 units. Ordering cost per order is found to be Rs. 12.5. The
carrying cost of average inventory is 20% per year and the cost per unit is Re.1.00. Determine
the optimal economic quantity and make your recommendations.

9. A manufacturing company purchase 9000 parts of a machine for its


annual requirements ordering for month usage at a time, each part costs Rs. 20. The ordering
cost per order is Rs. 15 and carrying charges are 15% of the average inventory per year. You
have been assigned to suggest a more economical purchase policy for the company. What
advice you offer and how much would it save the company per year?

10. A company marketing hypodermic needles to hospitals, would like to reduce its inventory
cosy by determining the optimal number hypodermic needles per order. The annual demand
is 1000 units, the ordering cost is Rs.10 and the holding cost is Re. 0.50 per unit per year. If
the demand increases to 1200 units, what is the new EOQ? Also determine the number of
orders and time between orders.

11. Wohl’s discount store stocks toy race cars. Recently, the store has been given a quantity
discount schedule for these cars. The quantity schedule is shown in the table below; the
normal cost of a toy race car is $5.00. for orders between 1000 to 1999 units, the unit cost
drops to $4.80; for orders of 2000 or more units, the unit cost is $4.75 only. Furthermore, the
ordering cost is $49.00 per order, annual demand is 5000 toy cars, and inventory carrying
charge, as a percent of cost, is 20%. What order quantity will minimize the total inventory
cost?

Quantity Price
0 to 999 5.00
1000 to 1999 4.80
2000 and above 4.75

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