Scribd Logo
Upload

Welcome to Scribd!

  • 153 views

    Case 15. Fresh Water Bottling Company

    Uploaded by

    Charmie Lagdamen
    The document discusses the results of calculating optimal inventory levels for Fresh Water Bottling Company using both the economic order quantity (EOQ) model and assuming a maximum inventory level of 50,000 units. Key results include: 1) The maximum inventory level should not exceed 50,000 units to avoid increased costs. 2) The average inventory level when ordering 50,000 units at a time is 25,000 units. 3) Ordering at 50,000 units, the company would place 11 orders per year. 4) The annual set-up cost when ordering 50,000 units at a time is $60,500. 5) The annual holding cost when ordering 50,000 units

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Case 15. Fresh Water Bottling Company

    Uploaded by

    Charmie Lagdamen
    153 views5 pages
    The document discusses the results of calculating optimal inventory levels for Fresh Water Bottling Company using both the economic order quantity (EOQ) model and assuming a maximum inventory level of 50,000 units. Key results include: 1) The maximum inventory level should not exceed 50,000 units to avoid increased costs. 2) The average inventory level when ordering 50,000 units at a time is 25,000 units. 3) Ordering at 50,000 units, the company would place 11 orders per year. 4) The annual set-up cost when ordering 50,000 units at a time is $60,500. 5) The annual holding cost when ordering 50,000 units

    Original Description:

    Case study on Production and Operations Management

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the results of calculating optimal inventory levels for Fresh Water Bottling Company using both the economic order quantity (EOQ) model and assuming a maximum inventory level of 50,000 units. Key results include: 1) The maximum inventory level should not exceed 50,000 units to avoid increased costs. 2) The average inventory level when ordering 50,000 units at a time is 25,000 units. 3) Ordering at 50,000 units, the company would place 11 orders per year. 4) The annual set-up cost when ordering 50,000 units at a time is $60,500. 5) The annual holding cost when ordering 50,000 units

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    153 views5 pages

    Case 15. Fresh Water Bottling Company

    Uploaded by

    Charmie Lagdamen
    The document discusses the results of calculating optimal inventory levels for Fresh Water Bottling Company using both the economic order quantity (EOQ) model and assuming a maximum inventory level of 50,000 units. Key results include: 1) The maximum inventory level should not exceed 50,000 units to avoid increased costs. 2) The average inventory level when ordering 50,000 units at a time is 25,000 units. 3) Ordering at 50,000 units, the company would place 11 orders per year. 4) The annual set-up cost when ordering 50,000 units at a time is $60,500. 5) The annual holding cost when ordering 50,000 units

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    1. How much is the maximum inventory level?

    Results using Results using


    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows that the Maximum inventory level at an order quantity

    of 50,000 is equal to 50,000. Thus, Fresh Water Bottling Company should store

    not more than 50,000 its maximum inventory level for them not to increase cost.

    2. Average inventory

    Results using Results using


    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows that the average inventory at an order quantity of

    50,000 is equal to 25,000. It indicates that Fresh Water Bottling Company should

    stock its product not below the average inventory which is 25,000.

    3. Order per year


    Results using Results using
    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows the total number of times that Fresh Water Bottling

    Company will order the product. Thus, result shows that in one-year Fresh Water

    Bottling Company will order 11 times.

    4. Annual set up cost

    Results using Results using


    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows that the annual setup cost is equal to 60,500.00. This

    cost will be used by Fresh Water Bottling Company in the preparation or setting up

    a machine or process for their production.

    5. Annual holding cost


    Results using Results using
    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows that the annual holding cost is equal to 750.00. Thus,

    Fresh Water Bottling Company has an additional cost in storing and maintaining

    the inventory of 750.00 per year at 50,000 order quantity.

    6. Total cost

    Results using Results using


    Parameter
    EOQ 50,000
    Optimal order quantity (Q*) 449,073.10
    Maximum Inventory Level
    449,073.10 50,000
    (Imax)
    Average inventory 224,536.60 25,000
    Orders per period(year) 1.22 11
    Annual Setup cost 6,736.10 60,500.00
    Annual Holding cost 6,736.10 750.00
    Unit costs (PD) 4,400,000.00 4,400,000.00
    Total Cost 4,413,472.00 4,461,250.00

    Table above shows the results using the Economic Order Quantity and

    using the 50,000. It shows that the total cost to be incurred using the 50,000 order

    quantity at a unit cost of P8.00 will be P4,461,250.00 annually.

    1. Optimal order quantity

    Parameter Value
    Optimal order quantity (Q*) 10,000
    Maximum Inventory Level (Imax) 10,000
    Average inventory 5,000
    Orders per period(year) 5
    Annual Setup cost 2,500.00
    Annual Holding cost 7,750.00
    Unit costs (PD) 387,500.00
    Total Cost 397,750.00

    Table above shows the optimal order quantity at 50,000 annual demand of

    bottles and 20% holding cost with the discount offer to the customers. Result

    shows a 10,000 optimal order quantity; it indicates the total number of bottles

    should Fresh Water Bottling Company order in order for the company to reduce

    holding cost.

    2. Average inventory

    Parameter Value
    Optimal order quantity (Q*) 10,000
    Maximum Inventory Level (Imax) 10,000
    Average inventory 5,000
    Orders per period(year) 5.00
    Annual Setup cost 2,500.00
    Annual Holding cost 7,750.00
    Unit costs (PD) 387,500.00
    Total Cost 397,750.00

    Table above shows the optimal order quantity at 50,000 annual demand of

    bottles and 20% holding cost with the discount offer to the customers. Result

    shows a 5,000 average inventory; It indicates that Fresh Water Bottling Company

    should stock its product not below the average inventory of 5,000 bottles.

    3. Orders per period

    Parameter Value
    Optimal order quantity (Q*) 10,000
    Maximum Inventory Level (Imax) 10,000
    Average inventory 5,000
    Orders per period(year) 5
    Annual Setup cost 2,500.00
    Annual Holding cost 7,750.00
    Unit costs (PD) 387,500.00
    Total Cost 397,750.00

    Table above shows the optimal order quantity at 50,000 annual demand of

    bottles and 20% holding cost with the discount offer to the customers. Result

    shows a 5 times orders per year; It shows the total number of times that Fresh

    Water Bottling Company will order the product. Thus, result shows that in one-year

    Fresh Water Bottling Company will order 5 times.

    4. Total Cost

    Parameter Value
    Optimal order quantity (Q*) 10,000.00
    Maximum Inventory Level (Imax) 10,000.00
    Average inventory 5,000.00
    Orders per period(year) 5.00
    Annual Setup cost 2,500.00
    Annual Holding cost 7,750.00
    Unit costs (PD) 387,500.00
    Total Cost 397,750.00

    Table above shows the optimal order quantity at 50,000 annual demand of

    bottles and 20% holding cost with the discount offer to the customers. Result

    shows that the total cost to be incurred by Fresh Water Bottling Company will be

    P397,750.00 annually.

    You might also like