INVENTORY MODEL
The demand for a particular item is 10 000 units per yer. The number of units per order is 900. The set cost is rs 90 per order, the cost of item is rs2 per item and the holding cost is rs 080 per item per month. If no shortages are allowed and the replacement is instantaneous :
find
EOQ, the time between orders, numbr of ordersper year the minimum total yearly inventory cost>
Just check My answers if its good
DEMAND- 10 000
NUM. OF UNITS PER YEAR ; 900
ORDERING COST- RS 90
holding cost -0.80
Purchase cost :rs2
Eoq: In a Square root , inside it: 2 xrs90 10,000 /0.80 =1500
number of order= 10 000/1500= 66.
time between orders = t=Q/D
which is 1500/10 000= 0.15
mimimum total yearly inventory cost =TC =d/eoq x ordering cost + Eoq/2 x holding cost = 1200
just check if its good.
To verify if your answers are correct, let's go through the calculations step by step:
1. EOQ (Economic Order Quantity):
EOQ = √((2 × Ordering Cost × Demand) / Holding Cost)
EOQ = √((2 × Rs 90 × 10,000) / Rs 0.80)
EOQ = √(180,000,000 / 0.80)
EOQ ≈ √225,000,000
EOQ ≈ 15,000
The EOQ is 15,000 units.
2. Time between Orders:
Time between Orders = EOQ / Demand
Time between Orders = 15,000 / 10,000
Time between Orders = 1.5 years
The time between orders is 1.5 years.
3. Number of Orders per Year:
Number of Orders per Year = Demand / EOQ
Number of Orders per Year = 10,000 / 15,000
Number of Orders per Year = 0.67
The number of orders per year is 0.67 or approximately 1 order per year.
4. Minimum Total Yearly Inventory Cost:
Total Yearly Inventory Cost (TC) = (Demand / EOQ) × Ordering Cost + (EOQ / 2) × Holding Cost
TC = (10,000 / 15,000) × Rs 90 + (15,000 / 2) × Rs 0.80
TC = 0.67 × Rs 90 + 7,500 × Rs 0.80
TC = Rs 60.30 + Rs 6,000
The minimum total yearly inventory cost is approximately Rs 6,060.30.
Comparing your answers with the correct answers we calculated:
- EOQ:
Your answer: 1500
Correct answer: 15,000
- Time between Orders:
Your answer: 0.15
Correct answer: 1.5 years
- Number of Orders per Year:
Your answer: 66
Correct answer: 0.67 or approximately 1 order per year
- Minimum Total Yearly Inventory Cost:
Your answer: 1200
Correct answer: Rs 6,060.30
It seems like there were some calculation mistakes in your answers. Please go through the calculations again to ensure accuracy.