Quiz Inventory Control System

Instructions for Quiz:

• Utilize Microsoft Excel for the calculations required in this case study. Ensure that all
steps are clearly displayed in your worksheet.
• For each case study, you are required to use a separate sheet within your Excel
workbook. Label each sheet appropriately with the question number (e.g., 'Question 1',
'Question 2', etc.).
• After completing your analysis for each question, summarize your findings in a few
sentences within the same sheet, clearly stating your final answer.
• Save your Excel file with the filename format:
[YourName]_InventoryOptimization_NIM.xlsx. For example, if your name is John
Doe and your NIM is 123456, the file should be named
JohnDoe_InventoryOptimization_123456.xlsx.
• Once you have completed the problem, submit your Excel file according to the method
specified by your instructor.

Question 1
The Gourmet Chocolate Company
The Gourmet Chocolate Company specializes in premium chocolates that are highly sought
after during specific holidays and promotional events throughout the year. They are planning
to implement the Economic Order Quantity (EOQ) model to optimize their inventory
management practices, but must first account for significant demand fluctuations and varying
costs.
Monthly Sales Data (affected by holidays and promotions):
• January (New Year promotions): 1,500 units
• February (Valentine's Day): 4,000 units
• March: 1,200 units
• April (Easter): 1,300 units
• May: 1,400 units
• June: 1,600 units
• July: 1,700 units
• August: 1,600 units
• September (Back to School): 1,800 units
 • October (Halloween): 2,000 units
• November (Thanksgiving): 4,500 units
• December (Christmas): 5,000 units
Variable Costs:
• Order Costs:
• Standard order cost: $100
• February: Increase by 20% due to high demand and logistical premiums.
• September: Decrease by 15% due to supplier agreements.
• Holding Costs (per unit per year):
• Standard holding cost: $3
• June, July, August: Decrease by 10% due to lower warehouse costs.
• November, December: Increase by 25% due to additional storage for high
volume.
Questions:
a) Calculate the total annual demand for the chocolates based on the provided monthly
sales data.
b) Adjust and compute the average monthly order and holding costs based on the seasonal
modifications.
c) Calculate the Economic Order Quantity (EOQ) using the adjusted costs.
d) Determine the total number of orders that should be placed annually based on the EOQ.
e) Calculate the total inventory cost using the EOQ model, including both ordering and
holding costs.
f) Analyze how the seasonal fluctuations in demand and cost affect the EOQ and overall
inventory strategy.

Question 2
Problem: TechParts Inc.
TechParts Inc. is a distributor of computer components. They’re looking to optimize their stock
levels for a specific type of RAM module that has steady sales.
Information:
• The expected annual demand for the RAM modules is 6,000 units.
• The cost to place an order is £60.
 • The holding cost per unit per year is £3.
• The lead time for an order to arrive after placement is consistently 3 weeks.
• TechParts Inc. operates on a 50-week year.
• TechParts wishes to establish a reorder point that ensures they will not run out of stock
before the next shipment arrives, considering a steady demand.
Task:
a) Calculate the EOQ for the RAM modules, (make sure the value in integers).
b) Determine the reorder point for the RAM modules based on the 3-week lead time.
c) Calculate the total inventory cost using the EOQ model, including both ordering and
holding costs.

Question 3
Problem for Global Tech Gadgets
Global Tech Gadgets is an electronics retailer that sells a high-demand smartwatch. The market
for smartwatches is competitive and the demand fluctuates based on several factors including
technology trends, competitor pricing, and economic indicators. To complicate matters, the
company runs aggressive marketing campaigns twice a year which significantly boost sales for
the following two months.
Demand Data:
• The base monthly demand for the smartwatch is 800 units.
• For each percentage point increase in consumer technology spending, the monthly
demand increases by 10 units.
• Conversely, for each percentage point increase in competitor's average pricing, the
monthly demand decreases by 5 units.
• After each marketing campaign, there is a spike in demand by an additional 50% for
the subsequent two months.
The marketing campaigns are run in June and November. The current year's economic forecast
predicts a 3% increase in consumer technology spending and a 2% increase in competitors'
pricing.
Cost Data:
• The cost to place an order is £40.
• The holding cost is 30% of the unit cost per year.
• The unit cost is influenced by the order quantity due to bulk discounts:
• £9.50 for order quantities less than 900.
 • £9.00 for quantities between 900 and 1,799.
• £8.50 for quantities of 1,800 or more.
Your Task:
a) Calculate the adjusted monthly demand based on the economic forecast and marketing
campaigns.
b) Determine the total annual demand for the smartwatches.
c) Calculate the Economic Order Quantity (EOQ) for each unit cost bracket.
d) Compute the total cost for each EOQ, including ordering and holding costs.
e) Identify the optimal order size that minimizes the total cost for Global Tech Gadgets.

Question 4
The Inventive Chef's Kitchenware Challenge
The Inventive Chef, a well-renowned culinary store, specializes in providing chefs with the
finest kitchen tools and gadgets. The store's manager, Sophie, is reassessing their inventory
strategy to optimize costs while ensuring that high-demand items are always in stock,
preventing any lost sales.
Sophie is evaluating the following five key items which are essential to any gourmet kitchen:
• Item 1: Professional Chef's Knife
• Item 2: Heavy-duty Cast Iron Skillet
• Item 3: Premium Sous Vide Machine
• Item 4: Advanced Food Processor
• Item 5: Artisanal Oak Cutting Board
Each item has specific costs associated with ordering and holding, as well as a direct cost and
selling price. Sophie knows that the demand for each product is steady throughout the year, but
with varying quantities. The cost of not having an item available (lost sales cost) is not just the
lost profit but also the potential loss of customer trust and future sales.
Here is the data Sophie has gathered:

Annual Ordering Holding Direct Selling Unit

Item
Demand (D) Cost Cost (HC) Cost Price (SP) Cost

1 120 100 30 25 150 100

2 80 200 50 20 180 120
3 150 250 60 22 200 130
4 200 150 45 18 160 110
5 60 180 40 24 170 115

The Challenge: Sophie must decide on the best ordering policy for each item to maximize the
store's net revenue. The calculation should take into account the potential for lost sales.
Using this information, calculate the optimal order quantity (Qo) and the net revenue associated
with each item. Can you help Sophie strategize the best inventory policy for The Inventive
Chef's store?