EXERCISES OF INVENTORY AND STOCK CONTROL 1 EXERCISE 1 Calcul

EXERCISES OF INVENTORY AND STOCK CONTROL (1). EXERCISE 1 Calculate the costs of stock for a product with the following information: Demand per year: 100000 unitslyear Production time: 120 seconds/unit We buy a machine to produce this demand: Cost= 200000 € Cost of Manpower: 20 /hour Cost of Materials: The product uses two materials (A and B) - Cost of Material A: 250 / material for 100 units Cost of Material B: 100 /material for 20 units Factor i = 0.20 (20 %) Cost of Administration Staff. 25 Ehour Time to prepare one order: 10 minutes Cost of Transport: 20 When you know the different costs (Citem, Ch, Co), calculate the Economic Order Quantity (EOQ).

Solution

Annual demand, D = 100,000 units

Cost per item, (Citem) = Cost of material (A + B) + Cost of manpower * Production time + Cost of machine / Annual demand

Citem = 250/100 + 100/20 + 20*120/3600 + 200000/100000 = 10.17   

Holding cost per unit, Ch = Cost per item * Factor i = 10.17*20% = 2.03

Order cost, Co = Time to prepare one order * Cost of admin staff + Cost of transport = 25*10/60 + 20 = 24.17

EOQ = (2DCo/Ch) = (2*100000*24.17/2.03)

= 1543 units