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Quantitative Business Analysis: Inventory

Requirements: Use given list of formulae to solve the questions. Show all workings.

Question 1

LIST OF FORMULAE 1. The Economic Order Quantity, [2CD EOQ = , TC= c.2+c, +DC 2. Total Inventory Cost (EOQ), 3. Reorder point, ROP = dxL 4. MODI Cost Values, C, =R, +K 1 = 0, -R,-K, 5. MODI Improvement Index, Question 3 Amin has determined that the annual demand for 'Appect Appetizers' is 1,200 bottles or 4 bottles per day. Amin, who works in his uncle's pharmacy, was in charge of purchasing. He estimated that it costs RM80 every time an order was placed. This cost included his wage, the cost of the forms used in placing the order, and so on. Furthermore he estimated that the cost of carrying one bottle of Appect is 15% of the unit cost of RM15. It took 3 working days for the order to arrive everytime Amin placed an order. The supplier of Appect Appetizer offered Amin a quantity discount scheme as in the following table; Order Quantity Less than 300 300 - 499 500 or more Price per unit (RM) 15.00 13.50 13.00 a) b) Find the total costs at each discount level and the optimal order quantity Amin should purchase (9 marks) What is the time between orders for the optimal order quantity? (3 marks) Does the reorder point change when the order quantity increases? What is the reorder point for this problem? (3 marks) c)

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