SKU Annual usage Unit cost Annual Value Usage

8 260 $ 15,400.00 $ 4,004,000.00

1 50 $ 60,000.00 $ 3,000,000.00
5 150 $ 3,500.00 $ 525,000.00
16 230 $ 2,000.00 $ 460,000.00
7 220 $ 1,800.00 $ 396,000.00
12 210 $ 1,250.00 $ 262,500.00
3 100 $ 2,000.00 $ 200,000.00
20 320 $ 500.00 $ 160,000.00
11 3,500 $ 44.00 $ 154,000.00
14 4,300 $ 35.00 $ 150,500.00
15 2,500 $ 48.00 $ 120,000.00
17 6,500 $ 18.00 $ 117,000.00
6 4,000 $ 25.00 $ 100,000.00
2 8,000 $ 10.00 $ 80,000.00
4 6,000 $ 12.00 $ 72,000.00
13 3,100 $ 20.00 $ 62,000.00
9 1,500 $ 30.00 $ 45,000.00
10 2,200 $ 18.00 $ 39,600.00
18 2,300 $ 15.00 $ 34,500.00
19 1,900 $ 14.00 $ 26,600.00
Total $ 10,008,700.00

15,400.00
Annual Value Usage
(%)
40.01% Inventory classification
69.98%
29.97% A
5.25% B
4.60% C
3.96%
20.02%
2.62%
2.00%
1.60% Inventory Degree of capital
classification importance in
1.54%
A SKU Major
1.50%
B SKU Intermediate
1.20%
C SKU Minor
1.17%
1.00%
0.80%
10.00%
0.72%
0.62%
0.45%
0.40%
0.34%
0.27%
 ABC Analysis
SKU Inventory items (%) Annual value usage (%)
8 ,1 10.00% 69.98%
5, 16, 7, 12, 3, 20 30.00% 20.02%
11, 14, 15, 17, 6, 2, 4, 13, 9, 10, 18, 19 60.00% 10.00%

ory Degree of capital Percent of Percent of annual

ation importance inventory items value usage
KU Major 10 70
KU Intermediate 30 20
KU Minor 60 10
100 100
 Annual demand in
Identification Code Unit cost units
XX1 $ 5.84 $ 1,200.00
B66 $ 5.40 $ 1,110.00
3CPO $ 1.12 $ 896.00
33CP $ 74.54 $ 1,104.00
R2D2 $ 2.00 $ 1,100.00
RMS $ 2.08 $ 961.00
Total
Annual demand Annual demand (%)
ABC A
7,008 6.97% Inventory classification
5,994 5.96% 13.94% A
1,004 1.00% B
82,292 81.89% 81.89% C
2,200 2.19% 4.18%
1,999 1.99%
100,497

Inventory Degree of capital

classification importance
A SKU Major
B SKU Intermediate
C SKU Minor
 ABC Analysis
SKU Inventory items (%) Annual value usage (%)
33CP 16.67% 81.89%
XX1, B66 33.33% 13.94%
R2D2, RMS, 3CPO 50.00% 4.18%

ntory Degree of capital Percent of Percent of annual

ication importance inventory items value usage
SKU Major 10 70
SKU Intermediate 30 20
SKU Minor 60 10
100 100
Annual usage (units) 40
Annual Value usage $ 10,000.00
Carrying Cost 12.50%
Ordering Cost per order $ 25.00
Unit cost $ 250.00

Caroline's Boutique Ltd. EOQ Table

No. of orders per year 1 2 3 4
value per order $ 10,000.00 $ 5,000.00 $ 3,333.33 $ 2,500.00
average inventory 5000 2500 1666.66666666667 1250
carrying costs $ 625.00 $ 312.50 $ 208.33 $ 156.25
ordering costs $ 25.00 $ 50.00 $ 75.00 $ 100.00
Total costs/year $ 650.00 $ 362.50 $ 283.33 $ 256.25

Economic Order Quantities (from the EOQ Table)

Optimal number of orders per year 5
Optimal Value per order
Optimal number of units per order 8
Optimal number of days' supply per order 73
 5 6 7 8 9 10
$ 2,000.00 $ 1,666.67 $ 1,428.57 $ 1,250.00 $ 1,111.11 $ 1,000.00
1000 833.33333333 714.2857142857 625 555.55555556 500
$ 125.00 $ 104.17 $ 89.29 $ 78.13 $ 69.44 $ 62.50
$ 125.00 $ 150.00 $ 175.00 $ 200.00 $ 225.00 $ 250.00
$ 250.00 $ 254.17 $ 264.29 $ 278.13 $ 294.44 $ 312.50
Caroline's Boutique Ltd. EOQ Table
Unit cost $ 250.00
Annual usage (units) 40
Annual Value usage $ 10,000.00
Carrying Cost 12.50%
Ordering Cost per order $ 25.00

Economic Order Quantities)

Optimal number of orders per year 5
Optimal Value per order
Optimal number of units per order
Optimal number of days' supply per order
 Stockout cost/unit $ 50.00
No 5
Lead time (# of days) 6
Annual Carying cost/unit $ 10.00
Average daily usage 50
Order point 300
ROP with Safety Stocks 400

Cost of Being Out of Stock

ROP Safety Stock Number Short Expected Annual Cost Total Annual Cost
300 0 50 1,125.00
100 1,750.00
150 $ 1,125.00 $ 4,000.00

350 50 50 $ 875.00
100 $ 750.00 $ 1,625.00

400 100 50 $ 375.00 $ 375.00

450 150 0 $ - $ -

Cost of Safety Stock

Safety Stock Cost of being Annual Carrying costs Total cost/yr Decision
ROP out of stock Approach
300 0 $ 4,000.00 - $ 4,000.00 Not Optimal
350 50 $ 1,625.00 500.00 $ 2,125.00 Not Optimal
400 100 $ 375.00 1,000.00 $ 1,375.00 400
450 150 $ - 1,500.00 $ 1,500.00 Not Optimal
Usage during reorder period Usage Probability
150 3 0.03
200 4 0.04
250 6 0.06
300 68 0.68
350 9 0.09
400 7 0.07
450 3 0.03
TOTAL 100 1.00
 Stockout cost/unit $ 50.00
No 5
Lead time (# of days) 9
Annual Carying cost/unit $ 26.00
Average daily usage 65
Order point 585
ROP with Safety Stocks Not Optimal

Cost of Being Out of Stock

ROP Safety Stock Number Short Expected Annual Cost Total Annual Cost
325 0 50 1,125.00
100 1,750.00
150 $ 1,125.00 $ 4,000.00

350 50 50 $ 875.00
100 $ 750.00 $ 1,625.00

400 100 50 $ 375.00 $ 375.00

450 150 0 $ - $ -

Cost of Safety Stock

Safety Stock Cost of being Annual Carrying costs Total cost/yr Decision
ROP out of stock Approach
300 0 $ 4,000.00 - $ 4,000.00 Not Optimal
350 50 $ 1,625.00 1,300.00 $ 2,925.00 350
400 100 $ 375.00 2,600.00 $ 2,975.00 Not Optimal
450 150 $ - 3,900.00 $ 3,900.00 Not Optimal
Usage during reorder period Usage Probability
150 3 0.03
200 4 0.04
250 6 0.06
300 68 0.68
350 9 0.09
400 7 0.07
450 3 0.03
TOTAL 100 1.00