Ashish  keeps  his  inventory in special containers. Each  container occupies 10  sq fit of  store space. Only  5000 sq ft  of the storage space is available. The  annual demand for the inventory  item is 9000 containers priced at Rs. 8 per container. The  ordering cost is  estimated at Rs. 40 per order and the  annual  carrying  costs  amount to 25%  of the inventory  value.

 Would you  recommend to ashish to increase  his to rage space? If  so how much should  be the  increase?

Solution :

 Given D = 9000 units , A =  Rs. 40 / order , C - Rs. 8 / unit and h = 25% of Rs. 8 = Rs 2 unit / year

We have

      EOQ = √2AD / h

 

       =   √2X 9000 X 40 / 2 = 600

With  EOQ = 600 units  the  maximum  level of inventory  would  be  600 units and the space required to  hold it equals 600 X 10 = 6000 square feet.  The present capacity  being 5000  square  feet he should  increase the storage capacity  by 1000 square feet.

Posted Date: 3/1/2013 2:22:35 AM | Location : United States

Ask an Expert

Related Discussions:- Calculate annual demand for the inventory item, Assignment Help, Ask Question on Calculate annual demand for the inventory item, Get Answer, Expert's Help, Calculate annual demand for the inventory item Discussions

Write discussion on Calculate annual demand for the inventory item
Your posts are moderated

Write your message here..

Related Questions

Explain shareholder activism, McDonald's Corporation, the world's largest f... McDonald's Corporation, the world's largest fast-food restaurant chain, with 2010 revenues of $24 billion,has recently been on a "roll." Its shareholder value has more than doubled

Explain tool like this one help identify the target market, Complete the fo... Complete the following steps for this assignment: 1. Select the following link to visit a Web site that is an online demographic tool used to help establish demographics about c

Explain the decision variables for this problem, Problem 4: Comp-Max Comput... Problem 4: Comp-Max Computers assembles computers and computer equipment. It is about to start production of three new types of computers, called model A, B, and C, respectively. E

Explain asset has negative risk, Suppose rf is 5% and rM is 10%. According ... Suppose rf is 5% and rM is 10%. According to the SML and the CAPM, an asset with a beta of -2.0 has a required return of negative 5% [= 5 - 2(10 - 5)]. Can this be possible? Does t

Explain decision quality requirement that is significant, A large municipal... A large municipality (250,000 citizens) is trying to decide where to locate a new community recreational center. The problem is relatively unstructured. There is a decision quality

Explain city water supply system, The network in figure below shows the pip... The network in figure below shows the pipeline transportation system for treated water from the treatment plant (node 1) to a city water supply system (node 14). The arc capacities

Explain units of output per dollar of input, A hamburger factory produces 4... A hamburger factory produces 40,000 hamburgers each week. The equipment used costs $5,000 and will remain productive for 4 years. The labor cost per year is $9,500. a. What is the

Explain what does business intelligence mean to a business, What does busin... What does business intelligence really mean to a business? What are the negative impacts of business intelligence? How does a database and data warehouse support business intellige

Explain what do you think sally should do, Case 2 Individual or Team Reward... Case 2 Individual or Team Reward? Jack Hopson has been making wood furniture for more than ten years. He recently joined Metropolitan Furniture and has some ideas for Sally Boston,

Explain what would happen without a code, In the field of human services, t... In the field of human services, there are very important ethical codes that should be followed as outlined by the National Association of Social Workers. After viewing the short vi