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Excel Online Structured Activity: EOQ Calculation The Las Vegas Corporation purchases a critical component from one of its key suppliers. The operations manager wants to determine the economic order quantity, along with when to reorder, to ensure the annual inventory cost is minimized. The information obtained from historical data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Round your answers according to the input instructions for each question but use the unrounded values in the further calculations. Open spreadsheet Questions 1. What is the economic order quantity? Round your answer to the nearest whole number. units 2. What is the annual purchase cost? Round your answer to the nearest dollar. 3. What is the annual holding cost? Round your answer to the nearest dollar. 4. What is the annual order cost? Round your answer to the nearest dollar5. What is the total annual inventory cost? Round your answer to the nearest dollar. 6. What is the reorder point? Round your answer to the nearest whole number. units 7. What is the number of orders placed per year? Round your answer to the nearest whole number. orders 8. What is the time between orders? Round your answer to the nearest whole number. daystemplate Excel Online Data View Tell me what you want to do File Home Insert Review ab Wrap Text Number Cut Copy Format Painter Arial Paste Number Font Alignment Undo Clipboard B10 1 EOQ Calculation 3 Annual requirement in units (R) 4 Setup cost (S) 5 Holding rate (k) 6 Unit Cost (C) 7 Order lead time (LT, days) 8 Number of days per year 6,400 $110 22% $10 Formulas #N/A 10 EOQ #N/A #N/A 12 Annual purchase cost 13 Annual holding cost 14 Annual order cost 15 Total inventory cost 16 Reorder point (ROP, days) 17 Number of orders per year 18 Time between orders (days) 19 20 21 #N/A #N/A #N/A #N/A 23 24 25 26 27

business   Operations-Management   
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Answer #1

Key Data and Answers to Question 1, 2, 3 and 4:

2 Economic Order Quantity is the quantity at which inventory holding & carrying costs are minimum 3 Annual Demand 4 Holding cost 5 (unit cost X 22%) ($ 10 X 22%) 6 Ordering cost 7 (set up cost) 8 Lead time 9 Working days per year 10 Unit cost 6400 units $ 2.20 $ 110 8 days 360 days $ 10 12 1) EOQ 800 units 13 Formula for EOQ: 14 Square Root of (2*Annual Demand Ordering cost per order/Annual holding cost per unit per annum) 15 Square root of (2 6400 units 110/2.20) 16 Square root of (14,08,000/2.20) 17 Square root of 640,0009 2) Annual Purchase cost $ 64,000 0 Annual purchase cost - Annual demand Unit cost 1 Annual purchase cost 6400 $ 10 64,000 2

Answer to Question 5, 6, 7 and 8:

5) Annual Inventory Cost $ 1,760 Total cost of managing inventory = Annual ordering cost + Annual carrying cost Total cost of

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