Homework Answers

6. The J. Sports Inc. purchases tennis balls at $120 per dozen from its suppliers. The John Sports will sell 40000 dozens of tennis balls evenly throughout the year. The total cost to handle a purchase order is $25. The insurance, property tax and rent for each dozen tennis balls in the average inventory is $1.5. The company wants a 12% return on average inventory investment. Required:  Compute the economic order quantity.  Compute the total annual inventory expenses to sell 40000 dozens of tennis balls if orders are placed according to economic order quantity computed in part 1

4. A company manufactures a special product which requires a component ‘Alpha’. The following particulars are collected for the year 2021.

Annual demand of ‘Alpha’ is 12,000 units.

Cost of placing an order $ 1200 per order.

Inventory carrying cost 21% per annum.

Cost of ‘Alpha’ is $ 550.

The company has been offered a quantity discount of 6% on the purchase of ‘Alpha’ provided the order size is 6000 components at a time.

a. Compute the EOQ.

b. Advice whether the quantity discount offer can be accepted.

5. A company manufactures steel boxes for that it needs steel to calculate the quantity required EOD needs to be calculated.

Taking below Assumptions:-

Ordering Cost = $120 per order

Annual quantity demanded = 8400 units

Holding cost = $2.5 per unit

In the below-given figure, we have shown the calculation of the EOQ for a manufacturing company.

2. The annual demand for an item is 16,000 units. The units cost is $24 and inventory carrying charges is 20% p.a. If the cost of one procurement is $1200, determine:

(a) E.O.Q

(b) No. of orders per year

(c) Time between two consecutive orders.

3. RIL Industries Ltd. are the manufacturers of chemical products. The following are the details of their operation during the year 2021.

Average monthly market demand 10,000 units.

Normal usage 600 units per month.

Ordering Cost is $ 1000 per order.

Inventory carrying cost 24% per annum.

Cost of chemical products $ 850

Compute:

(a) EOQ.

(b) If the supplier is willing to supply quantity to supply quarterly 2000 units at a discount of 6% is it accepting?

1. The regular yearly consumption of ‘ABC’ Ltd is 78,500 units at a price of $120 per unit. The storage cost is 22% on an average inventory and the cost of placing an order is $200.

a) How much quantity is to be purchased at a time?

b) State the number of order to be placed in a year?