Question 1:
Lott Manufacturing, Inc. has been ordering parts for its production process in lots of 10,000 units. Each order costs the firm $50 to place and holding costs per unit aver $3. Lott uses 200,000 units every 250 days.
a. Calculate EOQ
b. What is the difference in inventory costs between the EOQ and the current order quantity of 10,000 units?
c. Given the EOQ calculated in part a., how many orders should be placed and what is the average inventory balance?
d. If it takes two days to receive an order from suppliers, at what inventory level should Lott place another order?
Must show all formulas and steps in solving equations.
Question 2:
Assuming order costs are $55 per order, total periodic demand is $100,000 units and the EOQ is 24,000 units, calculate the implied per unit holding cost?
Question 3:
Below is presented table of data for cost of goods sold and ending inventory for the first six months of 2012 for Wynn Manufacturing, Inc.
DEC JAN FEB MAR APR MAY JUNE___________
Cost of goods sold 1000 1500 2100 2700 3500 4800
Ending Inventory_________________300 _ 450 630 810 _ 1050__1440____________
You may assume that each month has 30 days
a. Calculate the number of days of cost of goods sold held in inventory for March, April, May, and June assuming quarterly cost of goods sold is used to calculate average daily costs of goods sold.
b. Discuss your findings in part a. What is happening with the firm's investment in inventory?
c. Below is a purchasing schedule and a schedule showing the dollar amount of those purchases remaining as an inventory balance for successive months. Calculate a balance fraction matrix and discuss what it shows about the firm's management of its inventory balance.
ENDING INVENTORY BALANCES
______________________PURCHASES_____FEB____MAR___APR____MAY____JUNE_
Feb 1650 330174
Mar 2280 456 234
Apr 2880 576302
May 3740 748402
June 5190 1038
End of Month Inventory NA 63081010501440_