1. What is the economic order quantity (EOQ) formula? Define each term and give the units used.
How do the units change when monetary units are used?
2. What are the relevant costs to be considered when deciding whether to take a quantity discount?
On what basis should the decision be made?
3. What is the period order quantity? How is it established? When can it be used?
4. How do each of the following influence inventory lot-size decisions?
a. Lumpy demand.
b. Minimum orders.
c. Transportation costs.
d. Multiples.
Q75;
1. A company working toward lean will have smaller lot sizes when compared to using traditional
methods. Discuss how this will affect the costs associated with inventory. What are the controllable
and the uncontrollable costs?
2. An SKU costing $10 is ordered in quantities of 500 units, annual demand is 5200
units, carrying costs are 20%, and the cost of placing an order is $50. Calculate the
following:
a. Average inventory.
b. Number of orders placed per year.
c. Annual inventory carrying cost.
d. Annual ordering cost.
e. Annual total cost.
b. 10.4 orders per year
c. Inventory carrying cost = $500
d. Annual ordering cost = $520
e. Annual total cost = $1020