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Tagun Jamesgilson Omlec Act.

The document discusses the Economic Order Quantity (EOQ) formula used in inventory management, detailing its components: annual demand (D), ordering cost (S), and carrying cost (H). It presents two problems, calculating EOQ for a product with a steady demand of 200 units per month resulting in an EOQ of approximately 490 units, and for a clothing shop selling 1,000 pairs of jeans annually, resulting in an EOQ of 28 pairs. The calculations aim to minimize overall inventory costs.

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35 views2 pages

Tagun Jamesgilson Omlec Act.

The document discusses the Economic Order Quantity (EOQ) formula used in inventory management, detailing its components: annual demand (D), ordering cost (S), and carrying cost (H). It presents two problems, calculating EOQ for a product with a steady demand of 200 units per month resulting in an EOQ of approximately 490 units, and for a clothing shop selling 1,000 pairs of jeans annually, resulting in an EOQ of 28 pairs. The calculations aim to minimize overall inventory costs.

Uploaded by

jamesgilsontagun1126
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Name: TAGUN, James Gilson M.

Date: June 14, 2024


Year/Course: 3rd Year – BSIE Instructor: Ms. Vanessa Ici

Operations Management
Inventory Management Lecture Activity

The EOQ formula is given by:

where:
- (D) is the annual demand.
- (S) is the ordering cost per order.
- (H) is the carrying cost per unit per year.

Problem 1:
A company sells a particular product with a steady demand rate of 200 units per months.
The ordering cost per order is $100 , and the carrying cost per unit per year is $2. The company
operates the 12 months in a year. Calculate the economic order quantity (EOQ) for this product.

Given:
• Monthly demand (d) = 200 units
• Annual demand (D) = 200 units/month * 12 months/year = 2400 units/year
• Ordering cost per order (S) = $100 per year
• Carrying cost per unit per year (H) = $2

EOQ = √ 2 x 24002 x 1000 = 489.9 / 490 units


Therefore economic order quantity (ECQ) for this product is approximately 490 Units.

Problem 2:
A retail clothing shop carries in a line of men’s jeans , and the shop sells 1,000 pairs of
jeans each year . It cost the company $5 per year to hold a pair jeans in inventory , and the
fixed cost to place an order is $2.

Given:
• Annual demand (D) = 1000 pairs of jeans
• Ordering cost per order (S) = $2 per order
• Carrying cost per unit per year (H) = $5

EOQ =
√ 2 x 10005 x 2 = 28.28 / 28 pairs of jeans

Therefore in order minimize the overall cost of acquiring and maintaining inventory, the
store should order 28 pairs of jeans every single time.

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