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
Annual Value usage (%) ABC Analysis
40.01% Inventory classification
29.97% 69.98% A
5.25% B
4.60% C
3.96%
2.62%
2.00%
1.60% 20.02%
1.54%
1.50%
1.20%
1.17%
1.00%
0.80%
0.72%
0.62%
0.45%
0.40%
0.34%
0.27% 10.00%
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%
Code Unit Cost Demand Annual value usage %
33CP $ 74.54 1,104 $ 82,292.16 81.89% Inventory classification
XX1 $ 5.84 1,200 $ 7,008.00 6.97% A
B66 $ 5.40 1,110 $ 5,994.00 5.96% B
R2D2 $ 2.00 1,100 $ 2,200.00 2.19% C
RMS $ 2.08 961 $ 1,998.88 1.99%
3CPO $ 1.12 896 $ 1,003.52 1.00%
$ 100,496.56
ABC Analysis
SKU Inventory items (%) Annual value usage (%)
33CP 16.67% 81.89%
XX1, B66 33.33% 12.94%
R2D2, RMS, 3CPO 50.00% 5.18%
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 $ 5,000.00 $ 2,500.00 $ 1,666.67 $ 1,250.00
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 EOQ M
Optimal Value per order $ 2,000.00 $700.00
Optimal number of units per order 8
Carrying and Ordering Costs
$600.00
Optimal number of days' supply per order 73
$500.00
$400.00
$300.00
$200.00
$100.00
$-
1 2 3 4
Number o
carrying costs
5 6 7 8 9 10
$ 2,000.00 $ 1,666.67 $ 1,428.57 $ 1,250.00 $ 1,111.11 $ 1,000.00
$ 1,000.00 $ 833.33 $ 714.29 $ 625.00 $ 555.56 $ 500.00
$ 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
EOQ Model
$700.00
Carrying and Ordering Costs
$600.00
$500.00
$400.00
$300.00
$200.00
$100.00
$-
1 2 3 4 5 6 7 8 9 10
Number of orders per year
carrying costs ordering costs
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 $2,000.00
Optimal number of units per order 8
Optimal number of days' supply per order 73
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) 5
Annual Carying cost/unit $ 26.00
Average daily usage 65
Order Point 325
ROP with Safety Stocks 350
Cost of Being Out of Stock
ROP Safety Stock Number Short Expected Annual Cost Total Annual Cost
325 0 25 $ 562.50
75 $ 1,312.50
125 $ 937.50 $ 2,812.50
350 25 50 $ 875.00
100 $ 750.00 $ 1,625.00
400 75 50 $ 375.00 $ 375.00
450 125 0 $ - $ -
Cost of Safety Stock
Safety Stock Cost of being Annual Carrying costs Total cost/yr Decision
ROP out of stock Approach
325 0 $ 2,812.50 $ - $ 2,812.50 Not optimal
350 25 $ 1,625.00 $ 650.00 $ 2,275.00 350
400 75 $ 375.00 $ 1,950.00 $ 2,325.00 Not optimal
450 125 $ - $ 3,250.00 $ 3,250.00 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
