SCM 300 - Lab Practice 1-2 PDF

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PRACTICE EXERCISE Economic Order Quantity - PRACTICE EXERCISE

SCM 300

Below are some the key figures important in your analysis: Annual Per Unit Holding Costs are estimated at 30% of the wholesale cost. D= H= C= S=

13000 $60.00 $200.00 $400.00

Using Present Lot Size (Q = 1100) Calculate the time between orders? Do Not Round. 4.40 weeks T.B.O = (Q/D) * 52 = (1,100/13,000) * 52 = 4.4

How many orders per year are being placed annually? Do Not Round. 11.8 Orders per year # of orders/Year = (D/Q) = (13,000/1,100) = 11.8 According to the information supplied, what is the present annual inventory cost? (In other words, using their present lot size what is the annual inventory cost?) Also, separately identify, the annual cost of purchasing the inventory, the annual holding cost (AHC) and annual ordering cost (AOC). DC = (D*C) (13,000 x 200) = $ 2,600,000 AOC = (D/Q) * S = (13,000/1,100) * 400 = $ 4,727.27 AHC = (Q/2) * H = (1,100/2) * 60 = $ 33,000 TC = DC + AOC + AHC = $ 2,637,727.27

Using the Economic Order Quantity (Q=EOQ) Calculate EOQ. (USE A WHOLE NUMBER, NO DECIMALS) EOQ = 416 EOQ = SQRT [ (2*S*D) / H] = 416.3331999

Using the calculated EOQ, How often will orders be placed? Weeks. DO NOT ROUND (Show 2 decimal places) 1.67 Weeks T.B.O. = (EOQ/D) *52 = 1.665

PRACTICE EXERCISE According to the information supplied, what would be the annual inventory cost if they used the calculated EOQ? Also, separately identify the annual holding cost (AHC) and annual ordering cost (AOC). AHC = (EOQ/2) * H = 12,489.996 = $ 12,490 AOC = (D/EOQ) * S = 12,489.996 = $ 12,490 TC = 2,600,000 + (2 * 12,490) = $ 2,624,980 If they could order the EOQ instead of 1100, how much would this one store stand to save annually? $12,747.28 2,624,980 – 2,637,727.27 = 12,747.28 (switch cuz neg. if not) Orders can only be taken in increments of 250 units. What would be the appropriate order size? A. 250 units B. 500 units (need 416 at least) C. 750 units D. 1000 units Answer not provided. According to the appropriate order size recommendation, what would be the Total Annual Inventory cost? Also, separately identify, the annual cost of purchasing the inventory, the annual holding cost (AHC) and annual ordering cost (AOC). DC = DC = 13,000 x 200 = $ 2,600,000 AHC = (Q/2) *H = (500/2) * 60 = $ 15,000 AOC = (D/Q) * S = (13,000/500) x 400 = $ 10,400 TC = DC + AHC + AOC = $ 2,625,400

Therefore, the total annual savings for this store using our recommendation versus the present lot size of 1100, would be: 2,637,727.27 – 2,625,400 = $ 12,327.27

Suppose this data was for one single store. Using simple extrapolation, how much would this company stand to save if they had 14 other stores of equal size? $184,909.10 12,327.27 x 15 = 184,909.05...