For a reordering system based on inventory level, calculate buffer stock. What should be reorder level at this buffer stock? What would be carrying costs for a year?

Tuesday, June 21, 2011

For a reordering system based on inventory level, calculate buffer stock. What should be reorder level at this buffer stock? What would be carrying costs for a year?

The information provided for an item is as follows:
Annual demand = 12000 units
Ordering cost = Rs 60 per order
Annual carrying cost = 10 % of the purchase price.
Unit cost of item = Rs 10 and
Lead-time = 10 days.

There are 300 working days a year. Determine EOQ and a number of orders per year. In past two years, use rate has gone as high as 50 units per day. For a reordering system based on inventory level, calculate buffer stock. What should be reorder level at this buffer stock? What would be carrying costs for a year?