Question

Calculate the cost of operating under the different MRP lot sizing techniques:

Lot-for-Lot (L4L)

Economic Order Quantity (EOQ)

Least Total Cost (LTC)

Least Unit Cost (LUC)

Compare your results and state which method is the most cost efficient in this situation.

Consider the following MRP lot sizing problem:

Cost per item	$50
Order/setup cost	$75
Inventory carrying cost per item per week	$1

Weekly net requirements:

1	2	3	4	5	6	7	8
75	90	100	90	80	95	90	80

Answer 1

A	Economic Order Quantity (EOQ)	2*Total Quantity*Ordering cost/Carrying cost
	Total Quantity (75+90+100+90+80+95+90+80)	700
	Ordering cost	$75
	Carrying cost	$1
	EOQ	105000
	EOQ	324.04
B	Least total cost
	Ordering Quantity	324
	Total Quantity	700
	No of orders (700/324) rounded to next 1	3
	Ordering cost (3*75) (A)	$225
	Carrying cost (324/2) (B)	$162
	Cost Material (700*50) (C)	$35,000
Ans	Total cost (D=A+B+C)	$35,387
C	Least unit cost
	No of units (A)	700
	Total cost (B)	$35,387
	Unit cost per unit (C=B/A)	$50.55