Inventory Management OT

Question 1

EOQ?

Answer 1

Economic order quantity

Question 2

What is EOQ ordering?

Answer 2

We order in fixed batch quantities

Question 3

Cost of ordering a year?

Answer 3

Will be higher the more orders there are in a year

Question 4

What is holding cost?

Answer 4

Rent of the warehouse
Heating and lighting
Money used in inventory

Question 5

One order of 12000 in a year?

Answer 5

Start year at 12000. At end of year is 0. Average inventory is 6000

Question 6

1000 order every month?

Answer 6

Goes 1000 to 0 then 1000. Repeats monthly

Question 7

The lower the order quantity?

Answer 7

The lower the average inventory. Average inventory is 500

Question 8

When order quantity increases?

Answer 8

The inventory costs increase but fewer orders needed in year therefore ordering costs decreases

Question 9

Total cost per year?

Answer 9

Holding cost + reordering cost

Question 10

Re order cost calculation?

Answer 10

(Number of order / units) * cost of placing each order

Question 11

Holding cost calculation?

Answer 11

Average inventory * cost per unit per year * (discount if relevant)

Question 12

Holding cost when more quantity

Answer 12

Increases

Question 13

Reordering cost when more quantity

Answer 13

Decreases

Question 14

C_0 in EOQ?

Answer 14

Order costs each time

Question 15

D in EOQ?

Answer 15

The total demand

Question 16

C_H in EOQ?

Answer 16

Cost of holding one unit in one year

Question 17

Calculate total inventory cost/

Answer 17

Reorder + holding cost

Question 18

Why is purchase price ignored in total inventory?

Answer 18

It was always the same, not relevant. Unless discounts

Question 19

What happens with purchase cost?

Answer 19

Added to the inventory cost

Question 20

When there is a discount?

Answer 20

Inventory cost increases but purchase cost decreases

Question 21

What is buffer/safety inventory?

Answer 21

Hold extra units in inventory throughout the year to stop inventory going to zero

Question 22

EOQ and buffer inventory?

Answer 22

It is not relevant

Question 23

Holding cost and buffer inventory?

Answer 23

It is relevant. Add on holding costs of buffer inventory