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# Operations Management Inventory Calculations

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Please show your calculations and always round answers to FOUR decimal place.

An appliance store carries a certain brand of TV which has he following characteristics:

Average daily demand 2 units
Ordering cost \$25 per order
Carrying Cost 35% of unit cost per year
Unit cost \$400 per unit
Average Lead time 4 days
Standard deviation of daily demand 0.8 unit
Standard deviation of lead time 0.6 days

The firm currently orders the product 85 units at a time and operates 250 days a year.

A. With the current lot-size policy, what is the annual holding and ordering costs?
B. With the current lot size, what is the average time (in days) between orders?
C. Calculate EOQ for the TVS.

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#### Solution Preview

Please show your calculations and always round answers to FOUR decimal place.

An appliance store carries a certain brand of TV which has he following characteristics:
- Average daily demand 2 units
- Ordering cost \$25 per order
- Carrying Cost 35% of unit cost per year
- Unit cost \$400 per unit
- Average Lead time 4 days
- Standard deviation of daily demand 0.8 ...

#### Solution Summary

A key topic to understanding and utilize in Operations Management is Inventory Management. The ability to calculate annual demand, annual holding costs, annual ordering costs, economic order quantity and average time between orders gives the knowledge order the right inventory at the right time and in the right quantity.

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