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Unit - 8 8.2 - Inventory Management: Illustration: 1

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36 views3 pages

Unit - 8 8.2 - Inventory Management: Illustration: 1

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nebulanexus007
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Unit - 8

8.2 – Inventory Management

Illustration: 1
Raman purchases an item at the rate of 20 per piece from Shyam. 2000 units of
the item are required per year. What should be the EOQ if the cost per order is 5
and inventory carrying cost is 20% of purchase price.
Ans: EOQ = 70.71 or 71 unit

Illustration: 2
A dealer has to supply 200 unit of a product. He gets the product at 25 per unit
from the manufacture. The cost of ordering & transportation from the
manufacture is 37.5 per order. The cost of holding inventory is 7.5 % per year of
the cost of product. Find EOQ & TC.
Ans: EOQ = 89.44, TC = 5167

Illustration: 3
Calculate EOQ & total cost from the following data:
Annual demand - 2500 unit
Unit price - 2.50
Ordering cost - 4.00 per order
Storage rate – - 1 % per year
Interest rate – - 12% per year
Obsolescence rate - 7 % per year
Ans: EOQ = 200 unit, TC = 6350

Illustration: 4
A purchase manager place order each time for a lot of 500 unit of a particular
item. From the available data the following results are obtained.
Inventory carrying cost – 40%
Ordering cost per order – 600
Cost per unit – 50
Annual demand – 1000 unit
Ans: 56200 & 54899

Illustration: 5
The purchase manager of a company has collected the following data for one of
the A– class items:
Interest on the lock up capital – 20 %
Order processing cost for each order – 1000
Inspection cost per lot – 500
Follow up cost for each order – 800
Holding inventory – 5%
Other holding cost – 15%
Other cost per order – 1700
Annual demand – 10000 units
Cost per item – 100
Discount for a minimum order quantity of 1500 items is 10%. What should be the
ordinary policy of the purchase manager?
Ans: EOQ = 1414, TC = 1056568 , EOQ = 1500, TC = 953667

Illustration: 6
A company needs 1000 units annually of an article. The cost per article is 20.
Order cost per order is 25 and carrying cost is 25% of the cost of article per unit
annually. If the company orders 500 or more units than a discount of 5% is
available, determine the most suitable solution.
Ans: EOQ = 100 unit, TC = 20500, EOQ = 500, TC = 20237.5

Illustration: 7
In a factory raw material A and B are used weekly as follows:
Normal Usage …………150 kg
Maximum Usage ……… 225 kg
Minimum Usage ……… 75 kg
Re-order Quantity A - 1200 kg
B - 1800 kg
Reorder Period A - 4 to 6 weeks
B - 2 to 4 weeks

Calculate for each raw martial:


(i) Reorder level
(ii) Maximum stock level
(iii) Minimum stock level
(iv) Average stock level
Ans (i) A = 1350 units B = 900 units (ii) A = 2250 units B = 2550 units
(iii) A = 600 units B = 450 units (iv) A = 1425 units B = 1500 units

Illustration: 8
In a Company raw martial is used weekly as following:
Normal Usage - 50 units
Minimum Usage - 25 units
Maximum Usage - 100 units
Reorder Quantity - 300 units
Reorder Period 1 to 3 weeks.
Determine the following:
(i)Reorder Level (ii) Minimum Level (iii) Maximum Level and (iv) Average
Level
Ans: (i) 300 units (ii) 200 units (iii) 575 units (vi) 387.5 units

Illustration: 9
The particulars of receipts and issues of an item of stores for the month of august,
2007 are as follows:

2007,
August
1 Opening balance 500 tones @ 10 per tone
5 Issue (Req No. 323) 300 tones
9 Receipt (G.R. No. 215) 600 tones @ 11 per tone
14 Issue (Req No. 423) 250 tones
20 Receipt (G.R. No. 222) 100 tones @ 12 per tone
27 Issue (Req. No. 524) 400 tones
Prepare stores ledger account on the basis of above particulars

Solve the Question with these Methods:

1. FIFO
2. LIFO
3. Simple Average Method
4. Weighted Average Method

Illustration: 10
Q.4 (B) 2016:
The annual requirement of a company’s factory working 300 days a year , are
9000 units of a Raw material costing Rs 10 per unit , placing each order costs Rs
45 and the carrying cost is Rs 10% per year of average inventory. You are
required to calculate the economic order quantity.
Ans: 900

Illustration: 11
Q.5 (B) 2017:
A refrigerator manufacturer purchases 1600 units of a certain component from
M. His annual usage is 1600 units. The order placing cost is Rs 100 per order and
the cost of carrying one unit for a year is Rs 10% of cost per unit which is Rs 80.
Calculate the economic ordering quantity.
Ans: 200

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