ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average of 500 boxes but may sometimes sell a maximum of 600 boxes. The supplier takes an average of 5 days to deliver the order. During busier times, the supplier may take 7 days. Based on ABC’s records, ordering cost average P400 per order. Storage cost per box average P5 per year. There is also an opportunity cost of 1% per year for every peso invested in inventories. Each box of candles costs P450. If ABC would continue its current inventory management policy, it would keep 10,000 boxes as safety stock and order tendays-worth of inventory. (A) Reorder Point 1. What should be the reorder point in boxes? 2. How much would the normal lead time usage be? 3. How much should ABC keep as safety stock?
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
MAY I ASK FOR THE SOLUTIONS AND ANSWERS OF NO. 22 to 26 Thank you!
ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average of 500 boxes but may sometimes sell a maximum of 600 boxes. The supplier takes an average of 5 days to deliver the order. During busier times, the supplier may take 7 days. Based on ABC’s records, ordering cost average P400 per order. Storage cost per box average P5 per year. There is also an opportunity cost of 1% per year for every peso invested in inventories. Each box of candles costs P450. If ABC would continue its current inventory management policy, it would keep 10,000 boxes as safety stock and order tendays-worth of inventory.
(A) Reorder Point
1. What should be the reorder point in boxes?
2. How much would the normal lead time usage be?
3. How much should ABC keep as safety stock?
(B) Economic Order Quantity
4. What is the annual demand for the boxes of candles?
5. How much is the carrying cost of one box of candles for one year?
6. What is the economic order quantity for the boxes of candles? Round UP.
7. How many orders will be made per year on average if the economic order quantity was followed? Round off to two decimal places.
8. How much would the ordering cost for the year be on average if the economic order quantity was followed?
9. What would the average number of boxes be if the economic order quantity was used (excluding safety stock)? Round off to two decimal places.
10. How much would the carrying cost for the year if the economic order quantity was followed (excluding safety stock)?
11. How much would the total inventory related (ordering plus carrying) costs be if the economic order quantity was followed (excluding safety stock)?
12 to 17. Compute for the inventory-related cost if the entity purchased 500 boxes more and less than the EOQ.
| EOQ-500 | EOQ | EOQ+500 | |
| Ordering cost | 12. | 8. | 15. |
| Carrying cost | 13. | 10. | 16. |
| Total Inventory-related costs | 14. | 11. | 17 |
(C) Reorder Point and Economic Order Quantity
19. What would the average number of boxes be if the safety stock from Part A was kept and the EOQ from Part B
was followed? Round off to two decimal places.
20. How much would the carrying cost for the year be based on item 19?
21. How much would the total inventory related (ordering plus carrying) costs be if the economic order quantity was
followed (including safety stock)?
(D) Cost-Benefit Analysis: If ABC maintains its current inventory policy for the year,
22. How much would the forecasted carrying cost be?
23. How much would the forecasted ordering cost be?
24. How much would the total inventory-related costs be?
25. How much would the entity save it followed the reorder point and economic order quantity models?
26. How would you describe the entity’s current policy?
MAY I ASK FOR THE SOLUTIONS AND ANSWERS OF NO. 22 to 26 Thank you!
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