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Inventory Management for R&B

The document summarizes an inventory model activity for R&B Beverage Company. It calculates: 1) The economic order quantity of 438 cases based on the annual demand, ordering costs, and holding costs. 2) The reorder point of 72 cases based on the daily demand and lead time. 3) The cycle time of 30 days based on the order quantity, annual demand, and working days. 4) The total annual cost of $328.63 based on the order quantity, holding costs, and ordering costs.

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Ira Grace De Castro
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2K views1 page

Inventory Management for R&B

The document summarizes an inventory model activity for R&B Beverage Company. It calculates: 1) The economic order quantity of 438 cases based on the annual demand, ordering costs, and holding costs. 2) The reorder point of 72 cases based on the daily demand and lead time. 3) The cycle time of 30 days based on the order quantity, annual demand, and working days. 4) The total annual cost of $328.63 based on the order quantity, holding costs, and ordering costs.

Uploaded by

Ira Grace De Castro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Ira Grace B. De Castro.

ACN1 | CAED101

INVENTORY MODEL ACTIVITY


Suppose that the R&B Beverage Company has a soft drink product that shows a constant annual demand
rate of 3600 cases. A case of the soft drink costs R&B $3. Ordering costs are $20 per order and holding
costs are 25% of the value of the inventory. R&B has 250 working days per year, and the lead time is 5
days. Identify the following aspects of the inventory policy:

a. Economic order quantity


2𝐷𝐶𝑜
Q*=√
𝐶ℎ

2(3600)(20)
=√
(0.25)(3)
= 438.18

b. Reorder point
r = dm
3600
= (5)
250
= 72

c. Cycle time
250Q∗
T=
𝐷
250(438.18)
=
3600
= 30.43 days

d. Total annual cost


1 𝐷
TC = 𝑄𝐶ℎ + 𝐶
2 𝑄 𝑜
1 3600
= (438.18)(0.25)(3) + (20)s
2 438.18
= $328.63

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