Problem 1 (MTM Corp.)

Download as xlsx, pdf, or txt
Download as xlsx, pdf, or txt
You are on page 1of 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

You might also like