Calculate annual demand for the inventory item, Operation Management

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







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
Related Questions
I need a professional plan for this school project on this company. (• A plan of viable business options for "Family Fabrics" • A summation of expected results. Fire destroyed t

Assignable Causes - Causes of Variability Variability in process output may also be the result of external causes which are separately identifiable, and which are not inherent

A drug store has two windows available for serving customers, who arrive at a Poisson rate of 40/hr. Service time is exponentially distributed with a mean of 2 min. Only one window

Process Focused Production System This is a form of production system in which production operations are grouped according to the type of process. In other words, all productio

Explain the importance of performance appraisal. Significance of performance appraisal: This is helpful in operational decisions of personal management relating to pay rais

Under what kinds of circumstances might an organization wish to use control limits of 2 standard deviations or even 1 standard deviation? What should it bear in mind when using the

Courtesy - Customer Satisfaction and Service Quality Involves politeness, respect, consideration and friendliness of contact personnel (including receptionists, telephone oper

What are the three elements necessary for the formation of a business contract? What are the six defences to formation of a contract? Illustrate your definitions with examples of e

Discuss how laws tie into business ethics. Support your ideas with research and specific examples of laws discussed in your text.

Explain the concept involved in operations strategy