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Chapter 7 Math Practice

The document presents three problems related to inventory management for coffee grinders, desk lamps, and portable fans, each detailing sales rates, supplier costs, ordering costs, and holding costs. For each product, it asks for the annual cycle-inventory cost based on current lot sizes, whether alternative lot sizes would be better, and the calculation of the Economic Order Quantity (EOQ) along with its total annual cycle-inventory cost. The problems aim to evaluate inventory policies and optimize order sizes for cost efficiency.

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2 views1 page

Chapter 7 Math Practice

The document presents three problems related to inventory management for coffee grinders, desk lamps, and portable fans, each detailing sales rates, supplier costs, ordering costs, and holding costs. For each product, it asks for the annual cycle-inventory cost based on current lot sizes, whether alternative lot sizes would be better, and the calculation of the Economic Order Quantity (EOQ) along with its total annual cycle-inventory cost. The problems aim to evaluate inventory policies and optimize order sizes for cost efficiency.

Uploaded by

khadijaakter3210
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

Problem 1

Coffee grinder sales are 22 units per week, and the supplier charges $75 per unit. The cost of
placing an order (S) with the supplier is $55. Annual holding cost (H) is 20% of a grinder’s
value, based on operations of 52 weeks per year. Management chose a 440-unit lot size (Q) so
that new orders could be placed less frequently.

Q1: What is the annual cycle-inventory cost (C) of the current policy of using a 440-unit lot
size?
Q2: Would a lot size of 520 units be better?
Q3: For the coffee grinder, calculate the EOQ and its total annual cycle-inventory cost.

Problem 2

Desk lamp sales are 16 units per week, and the supplier charges $48 per unit. The cost of
placing an order (S) with the supplier is $38. Annual holding cost (H) is 30% of a lamp’s value,
based on operations of 52 weeks per year. Management selected a 312-unit lot size (Q) so that
new orders could be placed less frequently.

Q1: What is the annual cycle-inventory cost (C) of the current policy of using a 312-unit lot
size?
Q2: Would a lot size of 390 units be better?
Q3: For the desk lamp, calculate the EOQ and its total annual cycle-inventory cost.

Problem 3

Portable fan sales are 28 units per week, and the supplier charges $65 per unit. The cost of
placing an order (S) with the supplier is $50. Annual holding cost (H) is 22% of a fan’s value,
based on operations of 52 weeks per year. Management chose a 520-unit lot size (Q) so that
new orders could be placed less frequently.

Q1: What is the annual cycle-inventory cost (C) of the current policy of using a 520-unit lot
size?
Q2: Would a lot size of 624 units be better?
Q3: For the portable fan, calculate the EOQ and its total annual cycle-inventory cost.

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