B. Alimin Sdn. Bhd's plant experiences a daily demand of 100 units of component B that is purchased from a supplier at RM25 per unit. The plants operate 360 days per year. The plant has been using continues review policy for replenishment of the component, with an order size of 400 units. The cost of placing including delivery is RM20 and the annual holding cost per unit is RM4. In order to minimize total annual inventory cost, the company is now considering to use economic order quantity (EOQ) model.
B. Alimin Sdn. Bhd's plant experiences a daily demand of 100 units of component B that is purchased from a supplier at RM25 per unit. The plants operate 360 days per year. The plant has been using continues review policy for replenishment of the component, with an order size of 400 units. The cost of placing including delivery is RM20 and the annual holding cost per unit is RM4. In order to minimize total annual inventory cost, the company is now considering to use economic order quantity (EOQ) model.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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Transcribed Image Text:B. Alimin Sdn. Bhd's plant experiences a daily demand of 100 units of component B that is
purchased from a supplier at RM25 per unit. The plants operate 360 days per year. The plant
has been using continues review policy for replenishment of the component, with an order
size of 400 units.
The cost of placing including delivery is RM20 and the annual holding cost per unit is RM4.
In order to minimize total annual inventory cost, the company is now considering to use
economic order quantity (EOQ) model.
Transcribed Image Text:Required:
a. Calculate total annual inventory cost of component B by using the current policy.
b. Calculate the order size by using EOQ formula.
c. Calculate total annual inventory cost that the company can save if it uses EOQ.
d. Assuming the lead time is 3 days, compute re-order point of component B.
Note: Total annual inventory cost = Ordering costs + Holding Costs
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