Economic Order Quantity

1. ABC Hardware store is open for business 350 days a year. Annual demand for a power cutter at this store is
   700 units. Replenishment cost is $15 per order, and annual inventory holding cost is 10% of the inventory
   value. ABC pays $20 for each power cutter. What is the economic order quantity for this cutter, and what is the
   reorder point if the lead time is 5 days and ABC policy is to keep a safety stock of 10 units?
2. The following time-phasing chart is available for a single item within an MRP system. Complete this chart by
   estimating inventory on hand and planned order release values. Lead time is 2 weeks, and order policy is 100
   units, which means this part can be ordered only in 100-unit batches. Inventory replenishment is JIT; lead times
   are negligible.

Sample Solution