Problem 1:

Safety Stock with Stockouts X Company uses an item for which it places 10 order per year. The cost of a stockout is P 30, the carrying cost is P 0.50 per year per unit, and the following probabilities of a stockout have been estimated for various levels of safety stock: Safety Stock(units) Probability of Stockout 0 40% 50 20 100 10 200 5

Problem 2

A material is purchased for P 3 per unit. Monthly usage is 1,500 units, the ordering cost is P 50 per order and the annual carrying cost is 40%

Required: Compute the (a) economic order quantity, (b) Determine the proper order size if the material can be purchased at a 5% discount in lots of 2,000 units.

Problem 3 Pilot Company obtained the following costs and other data pertaining to one of its materials: Order quantity 3,500 units Normal use per day. 500 units Maximum use per day. 600 units Minimum use per day.. 100 units Lead time. 5 days Required: Compute the following a. Safety stock (maximum) b. order point c. normal maximum inventory d. absolute maximum inventor