Economic Order Quantity (EOQ) is a method used to calculate the ideal quantity to order. The underlying concepts of EOQ is the balance between ordering cost and holding cost. perform two calculations: A = annual demand = 20,000 Cp = Cost of an order which includes preparing and following up the order = $100.00 Ch = Unit inventory cost per year or item cost (P) $100 times annual carrying cost rate (r) (25%) 1. Use an excel file to calculate the EOQ order. Follow the video provided:

Economic Order Quantity (EOQ) is a method used to calculate the ideal quantity to order. The underlying concepts of EOQ is the balance between ordering cost and holding cost. perform two calculations: A = annual demand = 20,000 Cp = Cost of an order which includes preparing and following up the order = $100.00 Ch = Unit inventory cost per year or item cost (P) $100 times annual carrying cost rate (r) (25%) 1. Use an excel file to calculate the EOQ order. Follow the video provided:

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.
The two-bin approach is used to control inventory for a particular low-cost component. Each bin holds 1000 units. The annual usage of the component is 40,000 units. Cost to order the component is around $50. (a) What is the imputed holding cost per unit for this data? (b) If the actual annual holding cost per unit is only 5 cents, what lot size should be ordered? (c) How much more is the current two-bin approach costing the company annually, compared to the economic order quantity?
Alpha Products, Inc., is having a problem trying to control inventory. There is insufficient time to devote to all its items equally. The following is a sample of some items stocked, along with the annual usage of each item expressed in dollar volume. ITEM ANNUAL DOLLAR USAGE ITEM ANNUAL DOLLAR USAGE a S 30, 100 k S 1,700 b 27,000 120,000 c 93,000 m 111,000 d 1,400 n 3,000 e 1,800 o 500 f 30,000 p 114, 000 g 1,600 q 2,600 h 2,500 г 28,000 i 3, 200 s 2, 800 j 1,500 t 3, 100 a. Suggest a system for allocating control time? multiple choice ABC analysis Cycle counting b. Specify where each item from the list would be placed.
Consider a product with a daily demand of 500 units, a setup cost per production run of $100, a daily holding cost per unit of $0.20, and an annual production rate of 219,000 units. The firm operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the production order quantity model. How much money per year has that mistake cost the company?
In the past, Taylor Industries has used a fixed−time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items. ITEMNUMBER ANNUALUSAGE ITEMNUMBER ANNUALUSAGE 1 $1,900 11 $13,800 2 12,700 12 1,000 3 2,700 13 43,600 4 51,800 14 10,600 5 10,300 15 1,600 6 1,200 16 10,900 7 2,500 17 4,500 8 11,700 18 63,200 9 5,600 19 4,000 10 15,800 20 3,400 a. Classify each item in inventory using an ABC plan. item # Class (A, B, or C) 1 2 3 4 5 6 7 8 9 10
Custom Computers, Inc. assembles custom home computer systems. The heat sinks needed are bought for $12 each and are ordered in quantities of 1300 units. Annual demand is 5200 heat sinks, the annual inventory holding cost rate is $3 per unit, and the cost to place an order is estimated to be $50. Calculate the following: (a) Average inventory level (b) The number of orders placed per year (c) The total annual inventory holding cost (d) The total annual ordering cost (e) The total annual cost
The purpose of EQQ is: A. measure the cost of ordering inventory B. to lower the level of inventory C. to determine the optimal amount of inventory to order D. to find the number of days before inventory needs to be reordered
In the past, Taylor Industries has used a fixed−time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items. ITEMNUMBER ANNUALUSAGE ITEMNUMBER ANNUALUSAGE 1 $ 1,500 11 $ 13,000 2 12,000 12 600 3 2,200 13 42,000 4 50,000 14 9,900 5 9,600 15 1,200 6 750 16 10,200 7 2,000 17 4,000 8 11,000 18 61,000 9 800 19 3,500 10 15,000 20 2,900 a. Classify each item in inventory using an ABC plan
You have found the EOQ for a given item. The optimal time between replenishments (T*) is 9.3 weeks. Since you have to manage many different items, you are trying to minimize costs and coordinate your orders following the Power of Two Policy. Taking this into account, which of the following statements is true? Select all correct answers You should order this item every sixteen weeks. Changing the order frequency using this policy will increase the cost by no more than 6% of the optimal Total Relevant Cost. You should order this item every eight weeks. You should order this item every six weeks. You should order this item every four weeks. None of the above.
A car rental agency uses 96 boxes of staples a year. The boxes cost $5 each. It costs $10 to order staples, and it costs $0.80 to hold a box of staples in inventory for 1 year. A.) How many boxes of staples should the car rental company order each time it needs staples, to minimize the combined ordering and holding costs for staples? B.) Using the order size that minimizes the car rental agency’s combined ordering and holding costs for staples, how long will a single order of staples last the agency, before it must receive more staples? (Assume there are 52 weeks in the year for the car rental agency.) C.) Using the order size that minimizes the car rental agency’s combined ordering and holding costs for staples, how much does the car rental agency actually spend on holding costs for staples each year?
A manufacturing company uses 25,000 components at an even rate during a year. Eachorder placed with the supplier of the components is for 2,000 components, which is theeconomic order quantity. The company holds a buffer inventory of 500 components. Theannual cost of holding one component in inventory is $2.What is the total annual cost of holding inventory of the component?
The basic EOQ model is based on all the following assumptions except: * A. Annual demand is known and constant.B. The item is always available when needed.C.Estimates of ordering and carrying costs are accurate.D.Order is instantaneously received exactly when previous inventory has just been used up.