Problem 1. Suppose the total annual demand of a retail inventory is 20,000 units
ID: 403295 • Letter: P
Question
Problem 1.
Suppose the total annual demand of a retail inventory is 20,000 units. It costs $100. to place an order and $1 per unit per year to store the product.
PROBLEM 2.
Suppose the average daily demand of inventory is 10 units and the lead time ( time from ordering to receipt of materials ) is 5 days.There are 200 working days in one year. It takes $100. to place an order and the storage cost is $1/unit per day.
PROBLEM 3.
Suppose the total sale of a product is $1.0 million, and the average cost of inventory is $20,000.
PROBLEM 4.
Suppose a retailer is planning to order Christmas trees for the upcoming Christmas season. It costs $10 to buy a tree and he sells them for $20 per tree. All unsold trees must be dumped for a cost of $5.00 per tree.
Number of trees sold Probability
100
1.00
110
0.90
120
0.80
120
0.70
140
0.60
150
0.50
160
0.40
170
0.30
180
0.20
190
0.10
200
0.00
100
1.00
110
0.90
120
0.80
120
0.70
140
0.60
150
0.50
160
0.40
170
0.30
180
0.20
190
0.10
200
0.00
Explanation / Answer
1. EOQ = sqrt((20000*100)/(1)) = 1414.21
ordering cost = (20000/1414.21)*100 = $1414.21
inventory carrying cost = (1414.21/2)*1 = $707.10
total annual cost = 1414.21 + 707.10 = $2121.31
2. EOQ = sqrt((10*100)/1) = 31.62
ROP = demand*lead time
= 10*5 = 500
3. inventory turnover ratio = 1000000/20000 = 50
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