Question

Zeui Company's material requirement for 1 year is 20,000 units. Ordering cost for each order is Rp. 500,000. Carrying cost is Rp. 20,000 / unit. The lead time is 14 days.
Question:
A. Calculate the EOQ and inventory costs when EOQ!
B. Also calculate the inventory cost for 10 and 30 orders!
C. If the average usage per day is 55 units and the maximum usage per day is 75 units, then calculate the safety stock and ROP!

Answer 1

A. EOQ= √(2ab)÷c

a = annual requirement =20000 units

b= Ordering cost =500000

c= handling cost=20000

EOQ =√(2×20000×500000)÷20000= 1000 units

No. Of orders =20000÷1000 = 20 orders

Ordering cost = 20×500000= 100,00,000

Handling cost = 0.5× 1000×20000=100,00,000

Inventory cost at EOQ= ordering cost + handling cost

=1,00,00,000 +1,00,00,000=2,00,00,000

B . 10 order

Order quantity= 20000÷10 =2000

Ordering cost =10×500000=50,00,000

Carrying cost = 0.5×2000×20000=2,00,00,000

Total inventory cost= ordering cost + carrying cost=2,00,00,000+50,00,000=2,50,00,000

30 orders

Ordering quantity = 666 units

Ordering cost =30×500000=150,00,000

Carrying cost=0.5×666×20000=66,60,000

Total inventory cost = ordering cost + carrying cost=1,50,00,000+66,60,000=21660000

C.

Daily consumption= 20000÷ 365 =55 units

Reorder point= safety stock+ lead time consumption =280+(14*55) =1050 units

Safety stock=(maximum usage - average usage) ×lead time =(75-55)14= 280 units