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Inventory Management Practice Problems

The document outlines a series of inventory management practice problems requiring calculations related to economic order quantity (EOQ), total relevant costs, reorder points, and safety stock for various companies. Each problem provides specific data such as annual demand, purchase price, ordering costs, and carrying costs, necessitating the application of inventory management formulas. The problems are to be answered on a long bond paper and submitted by April 5, 2025.

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Lucienne Alcaraz
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17 views3 pages

Inventory Management Practice Problems

The document outlines a series of inventory management practice problems requiring calculations related to economic order quantity (EOQ), total relevant costs, reorder points, and safety stock for various companies. Each problem provides specific data such as annual demand, purchase price, ordering costs, and carrying costs, necessitating the application of inventory management formulas. The problems are to be answered on a long bond paper and submitted by April 5, 2025.

Uploaded by

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

Answer the following questions in a LONG BOND PAPER.

Hardcopy will be submitted on Saturday, April 5, 2025.

Inventory Management: Practice Problems

1. The Reign Company produces a luggage and bag tag product, and has the following information
available concerning its inventory items:
Annual demand - 50,000 units per year
Purchase price - ₱35 per package
Ordering costs - ₱250 per purchase order
Carrying costs - 10% of purchase price plus: ₱4.50

Required:
1. What is the economic order quantity? (round-off final answer in whole units)
2. What are the total relevant costs at the economic order quantity? (use EOQ rounded-off to 5
d.p.; total relevant costs round-off to 2 decimal places)
3. What are the total relevant costs, assuming the quantity ordered equals 1,000 units?

2. Silvas Company sells 20,000 units of radio evenly throughout the year. The cost of carrying one
unit in inventory for one year is P8, and the purchase order cost per order is P32.
Required:
1. What is the company’s economic order quantity (EOQ)?
2. How much is the total ordering and carrying cost using the EOQ?
3. How much is the total ordering and carrying cost if the company’s order size is at 500 units?

3. Yana Corp’s monthly material requirement used in production is 4,050 units. This material costs
P180 per unit for a supplier and it requires 5 days lead time from the date of order to date of
delivery. The ordering cost is P120 per order and the carrying cost is 8% of inventory
investment per unit. (Use 360 days).

Determine the following:

1. EOQ
2. Frequency of order
3. Total inventory cost (ordering + carrying)
4. Reorder point
5. Reorder point if maximum daily usage is 150 units
6. Safety stock
4. Joe Henry’s machine shop uses 2500 brackets during a year. These brackets are purchased from
a supplier 90 kilometers away. The following information is known about the brackets:

1.50

18.75

5. Bell Canada stocks a certain switch connector at its central warehouse for supplying field
service offices. The yearly demand for these connectors is 15 000 units. Bell estimates its
annual holding cost for this item to be P25 per unit. The cost to place and process an order
from the supplier is P75. The company operates 300 days per year, and the lead time to receive
an order from the supplier is two working days.
a. Find the economic order quantity.
b. Find the annual holding costs.
c. Find the annual ordering costs.
d. What is the reorder point?

6. The following inventory information relates to CCC Company:


a. Annual Unit Usage is 600,000 (Assume 50-week year in your calculations)
b. The carrying cost is 30% of the purchase price.
c. The purchase price if P10 per unit
d. Ordering Cost is P50 per order.
e. Safety stock desired 1,000 units.
f. Delivery time is two weeks.

Find the following:

i. EOQ
ii. Number of orders annually
iii. Carrying Cost
iv. Ordering Cost
v. Total Cost
vi. Average Inventory
vii. Reorder Point

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