Page 277 - DCOM303_DMGT504_OPERATION_RESEARCH
P. 277
Operations Research
Notes
=
(b) Calculation of Reorder Level
= Maximum Lead Time × Maximum Usage
=
= 100 units
(c) Calculation of Total Annual Inventory Cost
Cost of 2,400 units at ` 2.40, = ` 5,760.00
2,400
Ordering cost = = 9.3 order = or 10 orders at ` 4
258 40.00
258 37.15
Carrying cost of average inventory = × ` 0.288 =
2
Total cost 5837.15
(d) If the unit price is ` 5, then EOQ
`
=
`
=
= 179 units
Number of orders = = 13.4 orders or 14 orders
(e)
Total cost of inventory at the revised price (`)
Cost of 2,400 units at ` 5/unit 12,000.00
Ordering cost (14 orders ` 4/order 56.00
Carrying cost of average inventory = 179/2 × ` 5 × 12/100 53.70
Total cost….. 12,109.70
Therefore,
Difference in total inventory cost is:
(` 12.109.70 – 5,837.15) = ` 6,272.55
Example: For the following inventory problem find out:
1. How much should be ordered each time?
2. When should the order be placed?
3. What should be the inventory level (ideally) immediately before the material ordered is
received?
Annual consumption (360 days) 12,000 units
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