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Inventory Management IE 314: Operations Management KAMAL Lecture 7.

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Presentation on theme: "Inventory Management IE 314: Operations Management KAMAL Lecture 7."— Presentation transcript:

1 Inventory Management IE 314: Operations Management KAMAL Lecture 7

2 EXERCISE 12.2 Given: Boreki Enterpise has the following 10 items in inventory. Theodore Boreki asks you to divide these items into ABC classifications. What do you report? ItemDollar Value Annual Usage A2$503,000 B8$124,000 C7$451,500 D1$106,000 E9$201,000 F3$ G2$1, H2$20600 J5$101,750 J8$52,500

3 EXERCISE 12.2 Item Dollar Value Annual Usage Annual Usage Cost $ A2$503,000150,000 B8$124,00048,000 C7$451,50067,500 D1$106,00060,000 E9$201,00020,000 F3$ ,000 G2$1, ,000 H2$ ,000 J5$101,75017,500 J8$52,50012,500 Solution: Item Dollar Value Annual Usage Annual Usage Cost $ G2$1, ,000 F3$ ,000 A2$503,000150,000 C7$451,50067,500 D1$106,00060,000 B8$124,00048,000 E9$201,00020,000 J5$101,75017,500 J8$52,50012,500

4 EXERCISE 12.2 Solution: Item Annual Usage Annual Usage Cost $ % of total value Cumulative Percentage Class G23,000450, % 65.09% A F34,000250, %A A21,500150, % 25.81% B C76,00067, %B D11,00060, %B B850048, % 9.11% C E930020, %C J560017, %C J81,75012, %C 18,6501,075,500

5 EXERCISE 12.9

6 Given:

7 EXERCISE 12.9 Solution: a) EOQ = Q* = √ 2DS/H = 300 units b) Ann. Holding Cost = (Q*/2) H = 3,750 $ c) Ann. Ordering Cost= (D/Q*) S = 3,750 $ d) d = D/ working days per year = 15,000 / 300 = 50 units ROP = d * L = 50 * 2 = 100 units

8 EXERCISE 12.17

9 Given:

10 EXERCISE Solution: a) d = 12,000 / 300 = 40 units / day POQ = Q* = 4,472 units b) Avg. Ann. Holding Cost = (Q*/2) H [1 – (d/p)] = $ c) Avg. Ann. Ordering Cost= (D/Q*) S = $ d) Total cost=Lights cost+Avg. Ann. Holding Cost+Avg. Ann. Order Cost = 12,000 * = 12, $

11 EXERCISE 12.22

12 Given: The discount options are :

13 EXERCISE Solution: Discount OptionsPQ*TC 2,000 < X ,001 < X < 5, ,001 < X < 10, ,001 < X

14 EXERCISE Solution: b) Ann. Holding Cost = (Q*/2) H = (16971/2)*(1.8*0.05) = $ c) Ann. Ordering Cost= (D/Q*) S = (45000/16971)*200 = $ d) Ann. Cost of Silverware itself = 45000*1.25 = 56,250 $ e) Total Ann. Cost = ,250 = 57, $

15 HW


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