2.problems On Eoq_14.12.2018
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Model Problems on –Inventory Management [Economic Order Quantity-E.O.Q] Sr No.
1
Ans &
Problems Calculate the Economic Order Quantity from the following information. Also state the Number Of Orders to be placed in a year. Consumption of materials per annum : 10,000 kg Order placing cost per order : 50 Cost per kg. of raw materials : 2 Storage costs : 8% on average inventory
Remark Ans 2500 kg 4 orders p.a
2
Anil company buys its annual requirement of 36,000 units in six installments. Each unit costs Rs.1 and the ordering cost is Rs.25. The inventory carrying cost is estimated at 20% of unit value. Find the total annual cost of the existing inventory policy. How much money can be saved by using E.O.Q?
3
The annual demand for an item is 3,200 units. The units cost is Rs.6 and inventory carrying charges is 25% p.a. If the cost of one procurement is Rs.150, determine: (a) E.O.Q (b) No. of orders per year (c) Time between two consecutive orders.
4
A company manufactures a special product which requires a component ‘Alpha’. The following particulars are collected for the year 2012. 1. Annual demand of Alpha 8,000 units 2. Cost of placing an order 200 per order 3. Cost per unit of Alpha 400 4. Carrying cost % p.a. 20% The company has been offered a quantity discount of 4% on the purchase of ‘Alpha’ provided the order size is 4,000 components at a time.
EOQ‐ 3000 Saving By EOQ Rs.150 36750 vs. 36600
a.800 b.4 c.3
a.200 units b.EOQ 32,16,000 Quantity Discount 32,26,000
Required: (a) Compute the economic order quantity.
(b) Advise whether the quantity discount offer can be accepted.
5
PC Company purchases a specialized item and the quantity to be purchased is 2,500 pieces at a price of ` 200 per piece. Ordering cost per order is ` 200 and carrying cost is 2% per year of the inventory cost. Normal lead time is 20 days and safety stock is nil. Assume yearly working days as 250. Calculate i)the Economic Ordering Quantity. ii) Re-order Inventory Level. iii) If a 2% discount on price is given for order quantity 1,250 pieces or more in a lot, should the company accept the offer of discount?
Q.3b [Dec‐13 Cost Inter
6
PQR Limited produces a product which has a monthly demand of 52,000 units. Eg‐16 The product requires a Component X which is purchased at Rs. 15 per unit. For [CMA] every finished product, 2 units of Component X are required. The ordering cost is Rs. 350 per order and the carrying cost is 12% p.a. Required: (a) Calculate the economic order quantity for Component X. (b) If the minimum lot size to be supplied is 52,000 units, what is the extra cost, the company has to incur? (c) What is the minimum carrying cost, the company has to incur?
7
From the following particulars with respect to a particular item of materials of a Eg‐17 [CMA] manufacturing company, calculate the best quantity to order: Ordering Quantities[Tons] Less than 250 250 but less than 800 800 but less than 2,000 2,000 but less than 4,000 4,000 and above
Price per ton 6.00 5.90 5.80 5.70 5.60
The annual demand for the material is 4,000 tonnes. Stock
8
holding costs are 20% of material cost p.a. The delivery cost per order is Rs.6.00 M/s Tubes Ltd. are the manufacturers of picture tubes for T.V. The following are the details of their operation during the year 2012: Average monthly market demand
2,000 Tubes
Ordering Cost Inventory carrying cost
100 per order 20% per annum
Cost of tubes Normal usage
500 per tube 100 tubes per week
Minimum usage Maximum usage
50 tubes per week 200 tubes per week
Lead time to supply
6 – 8 weeks
Compute from the above: (i)
Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a discount of 5% is it worth accepting? (ii) Maximum level of stock (iii) Minimum level of stock (iii) Re-order level
Eg‐23 [CMA]
9
Illus. 4 CA S/N
10
CAS/N Q.1
11
CAS/N Q.3
12
CAS/N Q.7
1
Ans &
Problems Calculate the Economic Order Quantity from the following information. Also state the Number Of Orders to be placed in a year. Consumption of materials per annum : 10,000 kg Order placing cost per order : 50 Cost per kg. of raw materials : 2 Storage costs : 8% on average inventory
Remark Ans 2500 kg 4 orders p.a
2
Anil company buys its annual requirement of 36,000 units in six installments. Each unit costs Rs.1 and the ordering cost is Rs.25. The inventory carrying cost is estimated at 20% of unit value. Find the total annual cost of the existing inventory policy. How much money can be saved by using E.O.Q?
3
The annual demand for an item is 3,200 units. The units cost is Rs.6 and inventory carrying charges is 25% p.a. If the cost of one procurement is Rs.150, determine: (a) E.O.Q (b) No. of orders per year (c) Time between two consecutive orders.
4
A company manufactures a special product which requires a component ‘Alpha’. The following particulars are collected for the year 2012. 1. Annual demand of Alpha 8,000 units 2. Cost of placing an order 200 per order 3. Cost per unit of Alpha 400 4. Carrying cost % p.a. 20% The company has been offered a quantity discount of 4% on the purchase of ‘Alpha’ provided the order size is 4,000 components at a time.
EOQ‐ 3000 Saving By EOQ Rs.150 36750 vs. 36600
a.800 b.4 c.3
a.200 units b.EOQ 32,16,000 Quantity Discount 32,26,000
Required: (a) Compute the economic order quantity.
(b) Advise whether the quantity discount offer can be accepted.
5
PC Company purchases a specialized item and the quantity to be purchased is 2,500 pieces at a price of ` 200 per piece. Ordering cost per order is ` 200 and carrying cost is 2% per year of the inventory cost. Normal lead time is 20 days and safety stock is nil. Assume yearly working days as 250. Calculate i)the Economic Ordering Quantity. ii) Re-order Inventory Level. iii) If a 2% discount on price is given for order quantity 1,250 pieces or more in a lot, should the company accept the offer of discount?
Q.3b [Dec‐13 Cost Inter
6
PQR Limited produces a product which has a monthly demand of 52,000 units. Eg‐16 The product requires a Component X which is purchased at Rs. 15 per unit. For [CMA] every finished product, 2 units of Component X are required. The ordering cost is Rs. 350 per order and the carrying cost is 12% p.a. Required: (a) Calculate the economic order quantity for Component X. (b) If the minimum lot size to be supplied is 52,000 units, what is the extra cost, the company has to incur? (c) What is the minimum carrying cost, the company has to incur?
7
From the following particulars with respect to a particular item of materials of a Eg‐17 [CMA] manufacturing company, calculate the best quantity to order: Ordering Quantities[Tons] Less than 250 250 but less than 800 800 but less than 2,000 2,000 but less than 4,000 4,000 and above
Price per ton 6.00 5.90 5.80 5.70 5.60
The annual demand for the material is 4,000 tonnes. Stock
8
holding costs are 20% of material cost p.a. The delivery cost per order is Rs.6.00 M/s Tubes Ltd. are the manufacturers of picture tubes for T.V. The following are the details of their operation during the year 2012: Average monthly market demand
2,000 Tubes
Ordering Cost Inventory carrying cost
100 per order 20% per annum
Cost of tubes Normal usage
500 per tube 100 tubes per week
Minimum usage Maximum usage
50 tubes per week 200 tubes per week
Lead time to supply
6 – 8 weeks
Compute from the above: (i)
Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a discount of 5% is it worth accepting? (ii) Maximum level of stock (iii) Minimum level of stock (iii) Re-order level
Eg‐23 [CMA]
9
Illus. 4 CA S/N
10
CAS/N Q.1
11
CAS/N Q.3
12
CAS/N Q.7
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