Unit 8-Stock Level

8/2/2019 Unit 8-Stock Level

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Stock Level

1. From the following calculate:

(i) Re-ordering Level and (ii) MinimumLevel

(a) Minimum usage 100 units per week

(b) Normal usage 200 units per week (c) Maximum usage 300 units per week

(d) Re-order period 4 to 6 weeks

[Ans: (i) 1,800 units (ii) 800 units]

2. Calculate :

(i) Re-order Level

(ii) Re-order Quantity

(iii) Average Stock Level

Normal usage 100units per day

Minimum usage 60 units per day

Maximum usage 130 units per dayMinimum level 1,400 units

Maximum level 7,800 unitsRe-order period 20 to 30 days

[(i) 3,900 units, (ii) 5,100 units (iii) 4,600 units]

3. Following information is available to you.

(a) Minimum stock 1,000 units(b) Maximum stock 2,000 units

(c) Daily consumption of material 50 units

(d) Time required for receiving the materials 15 days

Required: Re-order Level

[Ans: 1,750 units]4. Calculate Re-ordering Level, Minimum Level andMaximum Level from the following data:

Re-order quantity 1,500 units

Re-order period 4 to 6 weeksMaximum consumption 400 units per week

Normal consumption 300 untis per week

Minimum consumption 250 units per week

Ans: Ordering Level 2,400 units;

Minimum Level 900 units;

Maximum Level 2,900 units;

5. The following information is available in respect of component DP 5:

Maximum stock level 8,400 units

Budgeted consumption- maximum 1,500 units per monthBudgeted consumption- minimum 800 units per month

Estimated delivery period - maximum 4 months

- minimum 2 months

You are required to calculate:


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Required: Re-order level

[Ans: 9,000 units]

10. The following information are relating to a businessMaximum stock level 25,500 units

Delivery period 10 to 15 weeks

Consumption per week 1,200 to 2,000 units

Required: Re-order quantity [EOQ]

[Ans: 7,500 units]

11. You are given the following information

Maximum lead time = 60 daysNormal lead time = 45 days

Maximum usage = 7,500 kg

Normal usage = 6,000 kg

EOQ = 60,000 kg.Required: Maximum Stock Level

[Ans: Rs. 3, 75,000]

12.From the following Calculate:

(a) Re-order level

(b) Minimum stock level

(c) Average Stock Level

Economic order quantity 5,000 units

Consumption 250 to 400 unitsRe-order period 6 to 12 days

Normal lead time 10 days

Normal consumption 300 units[Hints: (i) Normal re-order period and consumption are given, you don't need to determine

them. (ii) In this case, it is desirable to use the following formula to calculate average stock

level, by using given informationAverage stock level = Minimum stock level + of EOQ]

[Ans: ROL = 4,800 units; Minimum stock level =

1,800 units; Average stock level = 4,300 ]

13. Calculate the average stock level from the following information.

Minimum stock level = 800 units

Re-order quantity = 2,400 units][Ans: 2000 units]

14. From the following information, calculate the re-order level.

Annual consumption = 3,600 unitsWorking days = 360

Minimum stock level = 240 units

Lead time = 6 days

[Ans: 300 units]


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15. Calculate the danger level from the following.

Maximum emergency period = 40 days

Consumption = 200 to 400 units[Ans: 12,000 units]

Economic Order Quantity

1. Calculate Economic Order Quantity (EOQ) from the following.

Annual consumption 6,000 unitsCost of ordering Rs. 60

Carrying costs Rs. 2

[Ans: 600 units]

2. From the following particulars, calculate the Economic Order Quantity (EOQ).Annual requirements: 1,600 units

Cost of materials per units: Rs.40

Cost of placing and receiving one order: Rs. 50

Annual carrying cost for inventory value 10%[Ans: 200 units]3. Calculate EOQ from the following.

(a) Consumption during the year = 600 units

(b) Ordering cost Rs. 12 per order

(c) Carrying cost 20%

(d) Price per unit Rs. 20

[Ans: 60 units]

4. A manufacturer buys certain equipment form suppliers at Rs. 30 per unit. Total

annual needs are 800 units. The following further data are available:Annual return on investments 10%

Rent, insurance, taces per unit per year Re. 1

Cost of placing an order Rs. 100Required: EOQ

[Ans: 200 units]

5.Given the annual consumption of a material is 1,800 units; ordering costs are Rs. 2 perorder, price per unit of material is 32 paisa and storage costs are 25% per annum of stock

value.

Required: The Economic Order Quantity (EOQ).

[Ans: 300 Units]

6. From the following data, calculate:

(i)EOQ

(ii)Number of ordersOrder costs Rs. 300 per order

Holding costs 15% of cost

Annual consumption 10,000 unitsCost per unit Rs. 10

[Ans: EOQ 2,000; No. of orders 5]

7.A Company uses 10,000 units per annum of item costing Rs. 5 each. The cost of processing

the order is Rs. 100 and stock holding cost amount to 20% per year of the value of inventory.


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How much the company should buy at a time ( in a single order) to minimize the inventory

costs?

[Ans: EOQ 1,414 units]

8. From the figures given below, calculate Economic Order Quantity (EOQ) , Number

of order and Total cost at EOQ.

Total consumption of material per year 10,000 kgsBuying cost per order Rs. 50

Unit cost of material Rs. 2 per kg

Carrying and storage cost 8% on average inventory.

[Ans; EOQ 2,500; 4 orders per year; Total cost EOQ

Rs. 400]

9. A factory required 1,500 units of an item per month, each costing Rs. 27. The cost per

order is Rs. 150 and the inventory carrying charges work out to 20% of the averageinventory.

Required: a. Economic order quantity

b. Number of orders per year

c. Total cost at EOQ[Ans: EOQ 1,000 units; No. of orders 18; Total cost at EOQ Rs. 400]10. Following data is given to you.

a.Cost of ordering Raw materials Rs. 1,000 per order

Packing material Rs. 5,000 per order

b.Cost of holding inventory Raw Materials Re. 1 per unit p.m.

- Packing materials 5 paisa per unit p.m.c. Production rate 2,00,000 units per month

Find out EOQ for

(i) Raw material (ii) Packing materials

[Ans: (i) 2,00,000 units; (ii) 2,00,000 units]

1. Calculate the Economic Order QuantityAnnual requirement of materials = 80,000 units

Ordering cost per order = Rs. 100

Carrying cost per unit = 16%

[Ans: Rs. 2,500]

(Hint: If the unit price is not given then it can be assumed as Re. 1 or carrying cost will be as

Rs. 16/100 i.e. Rs. 0.16)

12. Annual requirement Rs. 10,000

Ordering cost Rs. 50

Carrying cost Rs. 0.16Required : EOQ in value (RS.)

[Ans: Rs. 2,500]

(Hint: If annual requirement is given in monetary value instead of units, the calculated EOQis expressed in value)

13. The carrying cost per unit from the following.

500 units =


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14. Your factory buys and uses a component for production at Rs. 10 per piece. Annual

requirement is 2,000 numbers. Carrying cost of inventory is 10% p.a. and the ordering cost is

Rs. 40 per order. The purchase manager agrees that as the ordering cost is very high, it isadvantageous to place a single order for the entire annual requirement. He also says that if we

order 2,000 units at time, we get a 3% discount from the supplier. Determine the Economic

Order Quantity. [Ans. EOQ 400 units]15. The following relations to inventory costs are found for a company.

(i) Order must be placed in multiples of 100 units(ii) Requirement for the year is 3,00,000 units

(iii) The purchase price per unit is Rs. 3

(iv) Carrying cost is Rs. 25% of the purchase price of goods

(v) Cost per order placed is Rs. 20(vi) Desired safety stock is 10,000 units, this amount is on hand initially

(vii) 3 days are required for delivery

Calculate:

(a) EOQ(b) How many orders should the company place each year?

(c) At what inventory level should an order be placed?

[Ans: EOQ 4,000 units; NO. of orders 75; Re-order

Level 13,000 units]

16. The annual requirement of an item is 12,000 units each costing Rs. 6. Every order

costs Rs. 200 at release and inventory carrying charges are 20% of the average inventory perannum.

Find out:

(i) Economic order quantity and corresponding total inventory cost (includingitem costs)

(ii) Where the item should be purchased in lots of 6,000 units at a time, if the

price per units is reduced by 5%.

[Ans: (i) EOQ 200 units, Total inventory cost Rs. 14,600

(iii) Total inventory cost Rs. 24,057 if purchased in lots of 6,000 units]

17. The following information in an inventory problem is available.

Annual demand 2,400 units

Units price (Rs.) 2.40

Ordering cost (Rs.) 4Storage cost (Rs.) 2% per year

Inventory rate 10% p.a.

Calculate (i) EOQ (ii) Total annual inventory cost (iii) How much does the totalinventory cost vary if the unit price is changed to Rs. 5

[Ans: (i) 258 units (ii) Rs. 5,837.15 (iii) Difference is

Rs. 12,109.70 Rs. 5,837.15 = Rs. 6,272.55]

18. The following details are available in respect of a firm.

Inventory requirement per year =6,000 units

Cost per unit (other than carrying and ordering cost) =Rs. 5

Carrying cost per item for one year = Re. 1


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Cost of placing each order = Rs. 60

Alternative order sizes (units) = Rs. 60

Required:Economic Order Quantity under Trial & Error Approach.

[Ans. 1,000 units]

Unit 8-Stock Level

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