Micro Corp.
uses
1,000 units of Chip
annually in its
production. Order
costs consist of
P10 for placing a
long-distance call
to make the order
and
P40 for delivering
the order by truck
to the company
warehouse. Each
Chip costs P100,
and the carrying
costs are estimated
at 15.625%
Micro Corp. uses
1,000 units of Chip
annually in its
production. Order
costs consist of
P10 for placing a
long-distance call
to make the order
and
P40 for delivering
the order by truck
to the company
warehouse. Each
Chip costs P100,
and the carrying
costs are estimated
at 15.625%
Micro Corp. uses
1,000 units of Chip
annually in its
production. Order
costs consist of
P10 for placing a
long-distance call
to make the order
and
P40 for delivering
the order by truck
to the company
warehouse. Each
Chip costs P100,
and the carrying
costs are estimated
at 15.625%
Micro Corp. uses
1,000 units of Chip
annually in its
production. Order
costs consist of
P10 for placing a
long-distance call
to make the order
and
P40 for delivering
the order by truck
to the company
warehouse. Each
Chip costs P100,
and the carrying
costs are estimated
at 15.625%
Cost of carrying
inventory.....................
............... P1.00 per
liter per year
Lead
time.............................
................................. 7
working days
Required: Compute
the following:
(1) Order point (OP) =
Lead Time Usage
(LTU) + Safety Stocks
(SS) = 840
(2) Average inventory
= Order Size (OS)/2 +
SS = 1000/2 + 140 =
640
(3) Maximum
inventory assuming
normal lead time and
usage/Normal
Maximum
Inventory = OP – LTU
+ OS = 840 – 700 +
1,000 = 1,140
(4) Cost of placing
one order; using EOQ;
P20
(5) Absolute
Maximum Inventory =
OP – (LT X Min
Daily Use) + OS ;
= 840 – (7 X 50) +
1,000 = 1,
Cost of carrying
inventory.....................
............... P1.00 per
liter per year
Lead
time.............................
................................. 7
working days
Required: Compute
the following:
(1) Order point (OP) =
Lead Time Usage
(LTU) + Safety Stocks
(SS) = 840
(2) Average inventory
= Order Size (OS)/2 +
SS = 1000/2 + 140 =
640
(3) Maximum
inventory assuming
normal lead time and
usage/Normal
Maximum
Inventory = OP – LTU
+ OS = 840 – 700 +
1,000 = 1,140
(4) Cost of placing
one order; using EOQ;
P20
(5) Absolute
Maximum Inventory =
OP – (LT X Min
Daily Use) + OS ;
= 840 – (7 X 50) +
1,000 = 1,
Cost of carrying
inventory.....................
............... P1.00 per
liter per year
Lead
time.............................
................................. 7
working days
Required: Compute
the following:
(1) Order point (OP) =
Lead Time Usage
(LTU) + Safety Stocks
(SS) = 840
(2) Average inventory
= Order Size (OS)/2 +
SS = 1000/2 + 140 =
640
(3) Maximum
inventory assuming
normal lead time and
usage/Normal
Maximum
Inventory = OP – LTU
+ OS = 840 – 700 +
1,000 = 1,140
(4) Cost of placing
one order; using EOQ;
P20
(5) Absolute
Maximum Inventory =
OP – (LT X Min
Daily Use) + OS ;
= 840 – (7 X 50) +
1,000 = 1,
A hospital buys disposable surgical packages from Pfisher, Inc. Pfisher’s price schedule is $50.25
per package on orders of 1 to 199 packages and $49.00 per package on orders of 200 or more
packages. Ordering cost is $64 per order, and annual holding cost is 20 percent of the per unit
purchase price. Annual demand is 490 packages. What is the best purchase quantity?
SOLUTION: We first calculate the EOQ at the lowest price
This solution is infeasible because, according to the price schedule, we cannot purchase 80
packages at a price of $49.00 each. Therefore, we calculate the EOQ at the next lowest price
($50.25):This EOQ is feasible, but $50.25 per package is not the lowest price. Hence, we have
to determine whether total costs can be reduced by purchasing 200 units and thereby
obtaining a quantity discount.
Purchasing 200 units per order will save $269.64/year, compared to buying 79 units at a time.
