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# Phase3id docx

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Unit 3 ID
Operations Management
Jordan Gibson
Professor Lori Forrest
April 22, 2018
As the production manager, you need to minimize both ordering and inventory costs.
You need to provide a recommendation of the optimal order quantity of raw materials
to your plant manager. Your objective is to determine the economic order quantity
(EOQ). If the annual demand for Ultamyacin at Smith ford is 400,000 units, then the
annual carrying cost rate is 15% of the cost of the unit. The product costs \$48/unit to
purchase, and the product ordering cost is \$28.00. In this report I was asked
What is the basic EOQ?
Economic Order Quantity (EOQ)
Ultamyacin at Smith ford
units
\$
Annual Demand
400,000
Products cost per Unit
48
Annual carrying cost,@15% of
cost of unit
15%
7.2
Product ordering cost per order,
28
Inventory Report
Economic Order Quantity =SQRT 2 x F x D/C
SQRT (2 x 28 x 400000)/ (7.2)

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SQRT (3111111) =1763.8
Then I Round off so the answer is 1764
What is the TC (total cost) at the EOQ?
Total cost
Product cost=Annual Demand x Product cost per unit
(400000 x \$48)=19.200, 000
Ordering cost
Number of Orders=Annual Demand/EOQ=400000/1764=226.8
Round off 227
Ordering cost=Order cost per order x Number of Orders
(227 x \$28)=6356
Inventory holding cost
Maximum inventory=EOQ 1764
Average Inventory=Maximum Inventory/2= 882
Inventory holding cost=average Inventory x Holding cost per unit
(882 x \$7.2)=6350
Total annual cost of EOQ Inventory system=Total product cost ordering cost inventory holding
cost
(Total cost ordering cost inventory holding cost)=12706
How much would the TC increase if the order quantity must be 1,000 units?
If the order quantity=1000 units
Total cost
Product cost=Annual Demand x Product cost per unit

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Unit 3 ID Operations Management Jordan Gibson Professor Lori Forrest April 22, 2018 • As the production manager, you need to minimize both ordering and inventory costs. You need to provide a recommendation of the optimal order quantity of raw materials to your plant manager. Your objective is to determine the economic order quantity (EOQ). If the annual demand for Ultamyacin at Smith ford is 400,000 units, then the annual carrying cost rate is 15% of the cost of the unit. The product costs \$48/unit to purchase, and the product ordering cost is \$28.00. In this report I was asked • What is the basic EOQ? Economic Order Quantity (EOQ) Ultamyacin at Smith ford Annual Demand Products cost per Unit Annual carrying cost,@15% of cost of unit Product ordering cost per order, units 400,000 15% Inventory Report Economic Order Quantity =SQRT 2 x F x D/C SQRT (2 x 28 x 400000)/ (7.2) \$ 48 7.2 28 SQRT (3111111) =1763.8 Then I Round off so the answer is 1764 • What is the TC (total cost) at the EOQ? Total cost Product cost=Annual Demand x Product cost per unit (400000 x \$48)=19.200, 000 Ordering cost Number of Orders=Annual Demand/EOQ=400000/1764=226.8 Round off 227 Ordering cost=Order cost per order x Number of Orders (227 x \$28)=6356 Inventory holding cost Maximum inventory=EOQ 1764 Average Inventory=Maximum Inventory/2= 882 Inventory holding cost=average Inventory x Holding cost per unit (882 x \$7.2)=6350 Total annual cost of EOQ Inventory system=Total product ...
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