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

Describe experienced unprecedented growth, Your public school district has ... Your public school district has experienced unprecedented growth and as a result has built the new 500 student North Park Elementary School. The district has three older and small

Explain the most important effect of card check recognition, The most impor... The most important effect of card check recognition procedures on union representation elections would be to: A. Increase the likelihood of first contract settlement. B. Give

Explain the elements of an organizations environment, Describe the elements... Describe the elements of an organization's external environment. Why is it important to understand the external environment?

Explain what is the expected value of perfect information, Renesmee Corpora... Renesmee Corporation is a chemical company. The research and development manager is trying to decide whether or not to develop a new solvent that would work at all conditions. It i

OPERATTION MANAGEMENT, DISCUSS THE ADVISABILITY OF USING MODULAR ASSEMBLIES... DISCUSS THE ADVISABILITY OF USING MODULAR ASSEMBLIES IN MANFACTURING

Significance of designing for profit in product development, Discuss the im... Discuss the importance of designing for profit in product development. What happens when there is distortion in these goals?

Explain the basic idea underlying the contingency view, Explain the basic i... Explain the basic idea underlying the contingency view. How would you go about identifying key contingencies facing an organization?

Describe meeting at wagoneer''s headquarters, Tobin is an independent contr... Tobin is an independent contractor for Wagoneer, Inc. While driving to a meeting at Wagoneer's headquarters, Tobin is texting his supervisor at Wagoneer. As a result of his inatten

Explain comparable worth, In detail, express your opinion regarding the "Co... In detail, express your opinion regarding the "Comparable Worth" issue.

Operation Management, Why should one study operations management? Why should one study operations management?