B.TECH (CIVIL) Prof S.

Umamaheswari(C1 SLOT)
UNIT III TUTORIAL SHEET INVENTORY MODELS
1. The demand for the particular item is 18,000 units per year. The holding cost per unit is Rs.1.20 per
year, and the cost of one procurement is Rs.400. No shortages are allowed, and the replacement rate is
instantaneous. Determine: (a) Optimum order quantity (b) Number of orders per year (c) Time
between orders, and (d) Total cost per year when the cost of one unit is Re.1.

2. Using the following information obtain the EOQ and the total variable cost associated with the policy
of ordering quantities of that size:
Annual demand Rs.20, 000; Ordering cost Rs.150 per order and inventory carrying cost 24% of
average inventory value.

3. ABC manufacturing company purchases 9000 parts of a machine for its annual requirements,
ordering one month usage at a time. Each part costs Rs.20. The ordering cost per order is Rs.15, and
the carrying charge is 15% of the average inventory per year. You have been asked to suggest a more
economical purchasing policy for the company. What advice would you offer and how much would it
save the company per year?

4. An aircraft company uses a certain part at a constant rate of 2500 per year. Each unit costs Rs.30 and
the company personnel estimate that it costs Rs.130 to place an order, and that the carrying cost of
inventory is 10% per year. How frequently should orders be placed? Also determine the optimum size
of each order.
5. A company uses rivets at a rate of 5000 kg per year, rivets costing Rs. 2 per kg. It costs Rs. 20 to
place an order and the carrying cost of inventory is 10% per year. How frequently should order for
rivets be placed and how much?
6. A company plans to consume 760 pieces of a particular component. Past records indicate that
purchasing department spent Rs.12, 555 for placing 15,500 purchase orders. The average inventory
was valued at Rs.45, 000 and the total storage cost was Rs. 7650 which included wages, rent, taxes,
insurance etc., related to store department. The company borrows capital at the rate of 10% a year.
If the price of a component is Rs.12 and lot size is 10, find the following: (i) Purchase price per year
(ii) Purchase expense per year (iii) Storage expense per year (iv) capital cost per year (v) total cost per
year.

7. An item is produced at the rate of 50 items per day. The demand occurs at the rate of 25 items per day.
If the set-up cost is Rs.100 and the holding cost is Re.0.01 per unit of item per day, find the economic
lot size for one run, assuming that the shortages are not permitted. Also find the time of cycle and
minimum total cost for one run.

8. A contractor has to supply 10000 bearings per day to an automobile manufacturer. He finds that,
when he starts a production run, he can produce 25000 bearings per day. The cost of holding a
bearing in stock for one year is 2 paise and the set-up cost of a production run is Rs.18. How
frequently should production run be made?


9. A contractor has to supply 20, 000 units/day. He can produce 30, 000 units/day. The cost of
holding a unit in stock is Rs.3 per year and the set-up cost per run is Rs.50. How frequently, and of
what size, the productions runs be made?

10. The demand for an item in a company is 18, 000 units per year, and the company can produce the
item at a rate of 3000 per month. The cost of one set-up is Rs. 500 and the holding cost of 1 unit
per month is 15 paise. Determine the optimum manufacturing quantity and the total cost per year
assuming the cost of 1 unit as Rs.2

11. The annual demand for a product is 1, 00, 000 units. The rate of production is 2, 00, 000 units per
year. The set-up cost per production run is Rs. 5000 and the variable production cost of each item
is Rs. 10. The annual holding cost per unit is 20% of its value. Find the optimum production lot
size, and the length of the production run.

12. A tyre producer makes 1200 tyres per day and sells them at approximately half that rate.
According figures show that the production set-up cost is Rs.1000 and carrying cost per unit is
Rs.5. If annual demand is 1, 20, 000 tyres, what is the optimal lot size and how many production
runs should be scheduled per year?

13. For a fixed order quantity systems find out the various parameters for an item with the following
data:
Annual consumption (D) = 10000 units, Cost of one unit = Re.1.00 C
s
= Rs. 12 per production
run; C
1
= Re.0.24 per unit. Past lead times : 15 days, 25 days, 13 days, 14 days, 30 days, 17 days.

14. A newspaper boy buys paper for Rs.1.40 and sells them for Rs.2.45. He cannot return unsold
newspaper .Daily demand has the following distribution.
r 25 26 27 28 29 30 31 32 33 34 35 36
p(r) .03 .05 .05 .10 .15 .15 .12 .10 .10 .07 .06 .02
If each days demand is independent of the previous day's how many papers he should order each
day?

15. A baking company sells cake by the pound it makes a profit of 50 paise a pound on every pound
sold on the day it is baked .I disposes of all cakes not sold on the day it is baked at a loss of 12
paise a pound if demand is known to be rectangular between 2000 and 3000 pounds determine the
optimum level of inventory if demand is instantaneous.