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Inventory Management Ques

The document discusses inventory management concepts and provides examples to calculate economic order quantity, reorder level, minimum stock level, maximum stock level, and average stock level for different inventory scenarios. Optimum batch size, interval between batches, and minimum inventory holding cost are also calculated based on given parameters like demand, setup costs, holding costs, purchase costs and discounts.

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Disha Commerce Academy
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22 views4 pages

Inventory Management Ques

The document discusses inventory management concepts and provides examples to calculate economic order quantity, reorder level, minimum stock level, maximum stock level, and average stock level for different inventory scenarios. Optimum batch size, interval between batches, and minimum inventory holding cost are also calculated based on given parameters like demand, setup costs, holding costs, purchase costs and discounts.

Uploaded by

Disha Commerce Academy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Inventory Management

1. Monthly demand for a component is 1000 units. Setting-up cost per batch is Rs. 120. Cost of
manufacture per unit is Rs. 20. Rate of interest may be considered at 10% p.a. Calculate the EBQ.

Solution

2. M/s Kobo Bearings Ltd. is committed to supply 24,000 bearings per annum to M/s Deluxe Fans
on a steady daily basis. It is estimated that it costs 10 paisa as inventory holding cost per bearing
per month and that the setup cost per run of bearing manufacture is ` 324.
(a) What is the optimum run size for bearing manufacture?
(b) What should be the interval between the consecutive optimum runs?
(c) Find out the minimum inventory holding cost.

Solution

3. The components A and B are used as follows: Normal usage 300 units per week each. Maximum
usage 450 units per week each. Minimum usage 150 units per week each. Re-order Quantity
A 2,400 units; B 3,600 units. Re-order period A - 4 to 6 weeks, B - 2 to 4 weeks.
Calculate for each component: (a) Re-order Level; (b) Minimum Level; (c) Maximum Level; (d)
Average Stock Level

Solution
4. Two components A and B are used as follows: Normal usage = 50 per week each. Re-order
quantity = A – 300; B – 500. Maximum usage = 75 per week each. Minimum usage = 25 per week
each. Re-order period = A – 4 to 6 weeks; B – 2 to 4 weeks.
Calculate for each component a. Re-order Level b. Minimum Level c. Maximum Level d. Average
Stock Level

5. The monthly requirement of raw material for a company is 3000 units. The carrying cost is
estimated to be 20% of the purchase price per unit, in addition to ` 2 per unit. The purchase
price of raw material is ` 20 per unit. The ordering cost is ` 25 per order.
(i) You are required to find EOQ.
(ii) What is the total cost when the company gets a concession of 5% on the purchase price if it
orders 3000 units or more but less than 6000 units per month.
(iii) What happens when the company gets a concession of 10% on the purchase price when it
orders 6,000 units or more?
(iv) Which of the above three ways of orders the company should adopt?
6. M/s. Tubes Ltd. are the manufacturers of picture tubes of T.V. The following are the details of
their operation during 2001:
Average monthly market demand 2,000 tubes. Ordering cost ` 100 per order. Inventory carrying
cost 20% per annum. Cost of tubes ` 500 per tube. Normal usage 100 tubes per week. Minimum
usage 50 tubes per week. Maximum usage 200 tubes per week. Lead time to supply 6 – 8 weeks
Compute from the above:
(1) Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a
discount of 5%, is it worth accepting?
(2) Maximum level of stock.
(3) Minimum level of stock.
(4) Re-order level of stock.

Solution

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