Bengal chemical manufactures a certain detergent for which the following details

ID: 354968 • Letter: B

Question

Bengal chemical manufactures a certain detergent for which the following details are given.

Annual requirement- 260000 kgs

Production quantity- 50,000 kgs

Safety stock 20,000 kgs

Set up cost- Rs 2000

Inventory carrying cost Rs 22.50 /kg/year

Number of working days 230

Questions

1) How many production batches or setups required every year?

2) What is the average inventory?

3) How many inventory turns?

4) Calculate the cover time?

5) If lead time is 10 days what should be reordering point? ( ROP)

6) What is the total cost and total cost per working day?

7) Find out pure EOQ?

8) The rate of production is stabilized at 7500 kgs/day. Find out the EOQ

Please write all the formulae and do it step by step.

Given:

Annual requirement (D)- 260000 kg

Production quantity (P)- 50,000 kg

Safety stock (SS) 20,000 kg

Set up cost (S)- Rs 2000

Inventory carrying cost (H) - Rs 22.50 /kg/year

Number of working days (N) - 230

Lets first calculate the economic order size

EOQ (Q) = ((2DS)/H)^0.5 = ((2*260000*2000)/22.50)^0.5 = 6798.69

EOQ is nothing but the batch size

So, number of batches= D/Q = 260000/6798.69 = 38.24 = 39 batches

Demand per day (d) = D/N= 260000/230 = 1130.43

Reorder point = d*L +SS = 1130.43*10 + 20000 = 31304.34

Total cost per working day = TC/N = 154300/230 = 672

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