OPMT - (1) Three Jays Corporation - EOQ and ROP PDF

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OPMT - (1) Three Jays Corporation - EOQ and ROP...

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Three Jays Corporation - Case Study Question Using the data in case Exhibit 4 and the 2012 annual demand, calculate the EOQ and ROP quantities for the five SKUs scheduled to be produced in the last week of June. How do these amounts compare with those calculated in 2011? Compare the increases in EOQs with the increases in annual demand.

Based on 2012 annual demand data and using the costs indicated in exhibit 4, the new economic order quantity and reorder point will be as follow: 2013 June's EOQ and ROP based on 2010 sales data and 2012 annual demand 12-ounce Jar

Strawberry Jam

Raspberry Jelly

Peach Jam

Blueberry Jam

Apple/Mint Jelly

Total Set Up Cost (S)

63.70

63.70

63.70

63.70

63.70

Annual Demand (D)

3,869

3,006

1,970

1,211

832

% Carrying Cost (i)

9%

9%

9%

9%

9%

Unit Cost (C)

28.34

30.52

26.86

29.01

26.32

EOQ (Cases)

440

373

322

243

212

ROP (Cases)

223

173

114

70

48

Since the current inventory level for all 5 SKUs is below reorder point, the economic order quantity should be produced. Details are as follow:

New ROP

223

173

114

70

48

Inventory Level as of 31 May 2013

134

76

98

55

39

units below reorder point

-89

-97

-16

-15

-9

Comparing 2011 and 2012 annual demand and EOQ indicates a positive correlation. When annual demand doubles, the economic order quantity will increase by approximately 40% or the square root of 2. The comparison is shown below:

Comparing 2011 and 2012 Annual Demand and EOQ Strawberry Jam

Raspberry Jelly

Peach Jam

Blueberry Jam

Apple/Mint Jelly

Annual Demand 2010

2,993

2,335

1,492

886

625

Annual Demand 2012

3,869

3,006

1,970

1,211

832

Demand increase (%)

29%

29%

32%

37%

33%

EOQ 2010

387

329

280

208

183

EOQ 2012

440

373

322

243

212

EOQ increase (%)

14%

13%

15%

17%

16%...