Safety Stock
Order Point
a.
750
1,350
b.
600
750
c.
600
350
d.
750
600
SS = (7,200 / 240) X (45-20) =
750
OP= 20 (7,200 / 240) + 750
=
1,350

14.
Venus Manufacturing Company uses 1,000 units of Chip
annually in its production. Order costs consist of P10 for placing
a long-distance call to make the order and P40 for delivering
the order by truck to the company warehouse. Each Chip costs
P100 and the carrying costs are estimated at 15.625% of the
inventory cost.
What is the economic order quantity for Chip?
√
√

15.
Using the date in No. 14, what is the total order cost?

c.
P525
d.
P650
Order Cost
= RU X CO
EOQ
=1,000 x P50
80
=
50,000
80
= P625
16.
Using the data in No. 14, what is the carrying cost for the
year?

17.
Pluto Company has developed the following data to
assist in controlling one of its material inventory items:
Economic Order Quantity
1,000 liters
Average Daily use
100 liters
Maximum Daily Use
120 liters
Working days per year
250 days
Safety Stock
140 liters
Cost of Carrying Inventory
P1.00 per liter per year

Lead time
7 working days
What is the reorder point?
a.
840 liters
b.
800 liters
c.
900 liters
d.
830 liters
Safety Stock + (Average daily use x Lead Time )
140 + (100 x 7 days) =
840 liters

18.
Using the data in No. 17, what is the average inventory?

19.
Using the data in No. 17, what is the maximum inventory
assuming normal lead time and usage?