Inventory Control Models

Self Test Questions

Theory

1. What are inventories?

2. What are the objectives that should be fulfilled by an inventory control system?

3. Explain the factors that affect the inventory level in an organization.

Practical

1. An item is produced at the rate of 50 units per day and is consumed at the rate of 25 units per day. If the set up cost is Rs. 100 per production run and holding cost in stock is Rs. 365 per unit per year, find

1. economic lot size per run
2. number of runs per year
3. total related cost

2. An item is required at a rate of 18000 units per year. Storage cost is Rs. 0.10 per unit per month. If the cost of placing an order is Rs. 400, find

1. EOQ
2. number of orders per year
3. cycle period
4. total annual cost if per unit cost is Rs.2.

3. A company uses annually 48000 units of a raw material costing Rs. 1.2 per unit. Placing each order cost Rs. 45 and the carrying cost is 15% per year of the average inventory.

1. Find the economic order quantity.
2. Supposing that the company follows the EOQ purchasing policy that it operates for 300 days a year, that the procurement time is 12 days and the safety stock is 500 units, find the reorder point, the maximum, minimum and average inventories.

4. A manufacture has to supply his customer 24000 units of his product. The demand is fixed and known. The customer has no storage space and so why the manufacturer has to ship a day's supply each day. If the manufacturer fails to supply, the penalty is Rs. 0.20 per month. The inventory holding cost is Rs. 0.10/unit/month and the set up cost is Rs. 350 per run. Find the optimal lot size for the manufacturer.

5. A manufacturer has to supply his customer with 600 units of his product per year. Shortages are not allowed and the storage cost amount to Rs. 0.60 per unit/year. The set up cost per run is Rs. 80.00. Find the optimal run size and the minimum average yearly cost.