From the following information of Rajeshree Co. Ltd. Find Out : (1) Economic Ordering Quantity. (2) Re-ordering level (3) Maximum level (4) Minimum level (5) Danger level (6) Safety stock Bi-monthly consumption 2,000 units Cost per unit Rs.1 Cost per placing an order Rs.12 Carrying cost 20% Lead time (maximum, average and minimum) 30-20-10 (days) Daily consumption (maximum, average and minimum) 45-30-15 (units) Maximum time of emergency procurement – 5 days Plz send solution for this sum?

Question

Answer

Solution:

Given information:
Bi-monthly consumption = 2,000 units
Cost per unit = Rs. 1
Cost per placing an order = Rs. 12
Carrying cost = 20%
Lead time (maximum, average, and minimum) = 30-20-10 (days)
Daily consumption (maximum, average, and minimum) = 45-30-15 (units)
Maximum time of emergency procurement = 5 days

(1) Economic Ordering Quantity (EOQ):

EOQ formula:

EOQ = √[(2DCo)/Ch]

Where,
D = Demand per year
Co = Cost per order
Ch = Carrying cost per unit

Demand per year = Bi-monthly consumption * 6
= 2,000 * 6 = 12,000 units

Co = Cost per placing an order = Rs. 12
Ch = Carrying cost per unit = 20% of Rs. 1 = Rs. 0.20

Substituting the values in the formula, we get:

EOQ = √[(2 * 12,000 * 12)/0.20]
= 2,449 units (approx.)

Therefore, the Economic Ordering Quantity is 2,449 units.

(2) Re-ordering level:

Re-ordering level = Maximum consumption * Maximum lead time

= 45 units * 30 days
= 1,350 units

Therefore, the re-ordering level is 1,350 units.

(3) Maximum level:

Maximum level = Re-ordering level + EOQ - Minimum consumption * Minimum lead time

= 1,350 + 2,449 - 15 * 10
= 3,084 units

Therefore, the maximum level is 3,084 units.

(4) Minimum level:

Minimum level = Re-ordering level - (Average consumption * Average lead time)

= 1,350 - (30 * 20)
= 750 units

Therefore, the minimum level is 750 units.

(5) Danger level:

Danger level = Re-ordering level - Maximum consumption * Maximum time of emergency procurement

= 1,350 - (45 * 5)
= 1,125 units

Therefore, the danger level is 1,125 units.

(6) Safety stock:

Safety stock = Re-ordering level - Average consumption * Average lead time

= 1,350 - (30 * 20)
= 750 units

Therefore, the safety stock is 750 units.

In conclusion, the Economic Ordering Quantity is 2,449 units, the re-ordering level is 1,350 units, the maximum level is 3,084 units, the minimum level is 750 units, the danger level is 1,125 units, and the safety stock is 750 units.

Answer

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