Problem:

1 "Inventory control is an integral part of effective management." Discuss.

2 A large firm uses an average of 50 packages of copier paper a day. The firm operates 250 days a year. The cost of each package of copier paper is Rs100 and the inventory carrying cost is estimated to be 2% of the cost of each pack. It costs approximately Rs20 to order and receive a shipment of paper and the deliveries from the supplier generally take 3 working days.

(a) Under the above assumptions, what is the economic order quantity for the packages of copier paper?

(b) How many orders will be placed per year?

(c) What is the total annual cost associated with your recommended EOQ?

(d) Calculate the reorder point.

(e) The office manager is currently using an order size of 480 packages. The partners of the firm expect the office to be managed in a cost-efficient manner. Would you recommend that the office manager use the optimal order size instead of 480 packages? Justify your answer.