1. Inventory Management IE 314: Operations Management KAMAL Lecture 7

2. EXERCISE 12.2 Given: Boreki Enterpise has the following 10 items in inventory. Theodore Boreki asks you to divide these items into ABC classifications. What do you report? ItemDollar Value Annual Usage A2$503,000 B8$124,000 C7$451,500 D1$106,000 E9$201,000 F3$500500 G2$1,500300 H2$20600 J5$101,750 J8$52,500

3. EXERCISE 12.2 Item Dollar Value Annual Usage Annual Usage Cost $ A2$503,000150,000 B8$124,00048,000 C7$451,50067,500 D1$106,00060,000 E9$201,00020,000 F3$500500250,000 G2$1,500300450,000 H2$2060012,000 J5$101,75017,500 J8$52,50012,500 Solution: Item Dollar Value Annual Usage Annual Usage Cost $ G2$1,500300450,000 F3$500500250,000 A2$503,000150,000 C7$451,50067,500 D1$106,00060,000 B8$124,00048,000 E9$201,00020,000 J5$101,75017,500 J8$52,50012,500

4. EXERCISE 12.2 Solution: Item Annual Usage Annual Usage Cost $ % of total value Cumulative Percentage Class G23,000450,00041.84% 65.09% A F34,000250,00023.25%A A21,500150,00013.95% 25.81% B C76,00067,5006.28%B D11,00060,0005.58%B B850048,0004.46% 9.11% C E930020,0001.86%C J560017,5001.63%C J81,75012,5001.16%C 18,6501,075,500

5. EXERCISE 12.9

6. Given:

7. EXERCISE 12.9 Solution: a) EOQ = Q* = √ 2DS/H = 300 units b) Ann. Holding Cost = (Q*/2) H = 3,750 $ c) Ann. Ordering Cost= (D/Q*) S = 3,750 $ d) d = D/ working days per year = 15,000 / 300 = 50 units ROP = d * L = 50 * 2 = 100 units

8. EXERCISE 12.17

9. Given:

10. EXERCISE 12.17 Solution: a) d = 12,000 / 300 = 40 units / day POQ = Q* = 4,472 units b) Avg. Ann. Holding Cost = (Q*/2) H [1 – (d/p)] = 134.16 $ c) Avg. Ann. Ordering Cost= (D/Q*) S = 134.16 $ d) Total cost=Lights cost+Avg. Ann. Holding Cost+Avg. Ann. Order Cost = 12,000 * 1 + 134.16 + 134.16 = 12,268.32 $

11. EXERCISE 12.22

12. Given: The discount options are :

13. EXERCISE 12.22 Solution: Discount OptionsPQ*TC 2,000 < X1.814142.141272.79 2,001 < X < 5,0001.6150001200 5,001 < X < 10,0001.416035.681122.5 10,001 < X1.2516970.561060.66

14. EXERCISE 12.22 Solution: b) Ann. Holding Cost = (Q*/2) H = (16971/2)*(1.8*0.05) = 530.34 $ c) Ann. Ordering Cost= (D/Q*) S = (45000/16971)*200 = 530.32 $ d) Ann. Cost of Silverware itself = 45000*1.25 = 56,250 $ e) Total Ann. Cost = 530.34 + 530.32 + 56,250 = 57,310.66 $

15. HW 12.12 12.13 12.39 12.25