Question

Given the following list of items:

a. Classify the items as A, B, or C

b. Determine the economic order quantity for each item (round to the nearest whole unit)

Item	Estimated Annual Demand	Ordering Cost	Holding Cost (%)	Unit Price
H4-010	20,000	55	25	4.5
H5-201	60,200	65	25	6
P6-400	9,800	85	35	30.5
P6-401	14,500	55	35	14
P7-100	6,250	55	35	11
P9-103	7,500	55	45	24
TS-300	21,000	45	30	47
TS-400	45,000	45	30	42
TS-041	800	45	30	22
V1-001	33,100	30	40	6

Answer 1

a) A class items are High doller items and contrinute 85% of revenue

B class items are medium dollar items and contrinute 10% revebue

C class items contribute 5 % revenue

Thus doller volume needs to be found first for A B C clasification

Can be solved in excel as below, calcutae doler volume as demand x Unit price price

then sort in decreasing order od doller volume

then find percentage of each item in total dollar volume

Formula used are as below

b) EQO is the economic order quantity at which total cost is minimized

the formula used to calculte EOQ is

EOQ=

where D is annual demand

Co = ordering cost

Cc is Holding cost

Thus the above can be modeled in excel as below

Thus the final output is below