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    Problem 1 (MTM Corp.)

    Uploaded by

    Kyle Vincent Saballa
    This document calculates the economic order quantity and relevant costs for ordering different quantities of an item with an annual demand of 5,000 units. The economic order quantity is determined to be 600 units, with 8.3333 orders per year. The average inventory is calculated to be 300 units. The total carrying cost is $7,500 and the total ordering cost is also $7,500, resulting in a total inventory cost of $1,115,000.

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    Problem 1 (MTM Corp.)

    Uploaded by

    Kyle Vincent Saballa
    2K views5 pages
    This document calculates the economic order quantity and relevant costs for ordering different quantities of an item with an annual demand of 5,000 units. The economic order quantity is determined to be 600 units, with 8.3333 orders per year. The average inventory is calculated to be 300 units. The total carrying cost is $7,500 and the total ordering cost is also $7,500, resulting in a total inventory cost of $1,115,000.

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    May this be able to help you in anyway somehow. You're welcome

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    This document calculates the economic order quantity and relevant costs for ordering different quantities of an item with an annual demand of 5,000 units. The economic order quantity is determined to be 600 units, with 8.3333 orders per year. The average inventory is calculated to be 300 units. The total carrying cost is $7,500 and the total ordering cost is also $7,500, resulting in a total inventory cost of $1,115,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    2K views5 pages

    Problem 1 (MTM Corp.)

    Uploaded by

    Kyle Vincent Saballa
    This document calculates the economic order quantity and relevant costs for ordering different quantities of an item with an annual demand of 5,000 units. The economic order quantity is determined to be 600 units, with 8.3333 orders per year. The average inventory is calculated to be 300 units. The total carrying cost is $7,500 and the total ordering cost is also $7,500, resulting in a total inventory cost of $1,115,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 5

    3 months supply 1,250

    Annual Demand AD 5,000 1,250*4


    Cost per unit CPU 220
    Cost per order CPO 900
    Annual Carrying Cost per unit ACCPU 25

    =√(2(𝐴𝐷)(𝐶𝑃𝑂))/𝐴𝐶𝐶𝑃𝑈
    1. Economic Order Quantity 5. Relevant Costs for order sizes

    Answer = 600 units =√(2(5,000)(900))/25 Units per Order


    *EOQ
    100
    = √360,000 250
    600
    = 600 units 1,000
    2,000
    =𝐴𝐷/𝐸𝑂𝑄
    2. Number of orders in a year (NOY)

    Answer = 8.3333 times in a year


    =5,000/600

    = 8.3333

    =1/2 (𝐸𝑂𝑄)
    3. Average Inventory

    Answer = 300 units


    =1/2 (600)

    = 300

    4. Total Carrying Cost (TCC) =1/2 (𝐸𝑂𝑄) (𝐴𝐶𝐶𝑃𝑈)

    TCC = 7,500 =1/2 (600)(25)

    = 7,500

    Total Ordering Cost (TOC) = (NOY)(CPO)

    TOC = 7,500 = 8.3333 x 900

    = 7,500

    Total Inventory Cost (TIC) = Cost of acquisition + TCC + TOC


    TIC = 1,115,000 = 1,100,000 + 7,500 + 7,500

    = 1,115,000
    osts for order sizes

    Order in a Year (NOY) Average Inventory (AI) Carrying Cost Ordering Cost
    *refer to no. 2 *refer to no.3 *refer to no. 4 TCC *refer to no. 4 TOC
    50 50 1,250 45,000
    20 125 3,125 18,000
    8.33333333333333 300 7,500 7,500
    5 500 12,500 4,500
    3 1,000 25,000 2,250

    Cost of acquisition = 220 x 5,000


    1,100,000
    Acquisition Cost Total Cost
    *refer to no. 4 TIC
    1,100,000 1,146,250
    1,100,000 1,121,125
    1,100,000 1,115,000
    1,100,000 1,117,000
    1,100,000 1,127,250

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