Project with Excel
Calculating Inventory Costs and Picking EOQ
MGMT4102
J. Wang
Name ________________________
Generate an Excel spreadsheet which is able figuring out annual inventory holding costs
and annual ordering costs for various order quantities (Q), with given annual demands (D), unit
annual holding costs (H), and unit ordering costs (S).
Your spreadsheet calculates the total annual holding cost, total annual ordering cost, and
total annual inventory cost for order quantities Q = 1, 2, 3, 4, 5, 6, …, 498, 499, 500 units per
order. Unit annual holding cost (H), unit ordering cost (S), and annual demand (D) are entered
by the user on the top of your spreadsheet.
Total annual holding cost = (Q/2)*H;
Total annual ordering cost = (D/Q)*S.
Total annual inventory cost = total annual holding cost + total annual ordering cost.
Download the template Excel sheet from my website, www.stockton.edu/~wangji, which
is on the page for MGMT4102, Chapter 12, with title Template for Inventory Costs. The
template is as below:
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
B
C
D
Inventory Costs with Varied H, S, D, and Q.
Unit holding cost, H=
<-Enter your H
Unit ordering cost, S=
<- Enter your S
Annual demand, D=
<- Enter your D
Min Total Inventory Cost=
EOQ, Q*=
Order
Quantity, Q
1
Annual Total
Holding Cost
Annual Total
Ordering Cost
Total Annual
Inventory Cost
2
3
4
Develop you Excel worksheet based on the template, using the following Excel
techniques:
Formula and function,
Cell address (absolute address and relative address),
Copy and Paste.
Make sure your spreadsheet can be used for various H’s, S’s, and D’s by simply change
the numbers in cells C3, C4 and C5. Use Copy-Paste as far as possible.
1
(1) Run your finished spreadsheet with following given values of Q, D, H, and S, and fill up the
following table according to the results of your spreadsheet. (You may need to press F9 key to
tell Excel for re-calculation.)
H, cost of
S, Unit
Q, Order
holding
D, Annual
ordering
quantity
one unit
demand
cost per
(units/order) for a year
(units/year)
order ($)
($)
100
10
320
1,800
340
10
320
1,800
465
10
320
1,800
35
40
110
1,200
80
40
110
1,200
325
40
110
1,200
10
8
70
1,200
145
8
70
1,200
400
8
70
1,200
Annual
inventory
holding cost
($)
Annual
ordering cost
($)
Total annual
inventory
cost ($)
(2) Use your spreadsheet to identity the best order quantity for each of the following
circumstances. (You may need to press F9 key to tell Excel for re-calculation.) Fill the table
below with the results of running your spreadsheet.
H, Unit
holding
cost ($)
S, Unit
ordering
cost ($)
D, Annual
demand
(units/year)
10
8
40
40
40
320
70
70
220
220
1,800
1,200
1,200
1,200
2,400
Q*, Best
Order
Quantity
(EOQ)
(units/order)
Annual
inventory
holding cost
($) with Q*
Annual
ordering
cost ($)
with Q*
Total
annual
inventory
cost ($)
with Q*
Turn in your finished workbook by e-mail with the workbook as an attachment. Your email must be titled as MGMT4102-Inventory-Costs-YourFullName, for example,
MGMT4102-Inventory-Costs-John-Smith.
My e-mail address is: jinchang.wang@stockton.edu .
Turn in the hardcopy of this sheet with the results filled in the above tables.
2
Excel Functions you may use.
You may find the further details of the functions and examples in the “Help” of Excel.
=MIN(R) Pick the minimum number from the range R. For examples:
=MIN(D15:D87) To pick the smallest number from the cells D15 to D87.
=IF(C,a,b) If condition C is true, then the value is a otherwise the value is b. For examples:
=IF(C6<0.5, “Head”, “Tail”) If value in cell C6 is less than 0.5, then this function’s value is
Head, otherwise it is Tail.
=IF(D14>E14,D14-E14,0) If value in D14 is larger than value in E14, then the function’s value
is the difference between the values of D14 and E14, otherwise it is 0.
Detailed Instructions for Setting up Excel Spreadsheet, in case you need them.
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
B
C
D
Inventory Costs with Varied H, S, D, and Q.
Unit holding cost, H=
<-Enter your H
Unit ordering cost, S=
<- Enter your S
Annual demand, D=
<- Enter your D
Min Total Inventory Cost=
EOQ, Q*=
Order
Quantity, Q
1
Annual Total
Holding Cost
Annual Total
Ordering Cost
Total Annual
Inventory Cost
2
3
4
For cells C3, C4, C5, enter tentative numbers. For example, 10 for cell C3, 50 for cell C4, 1500
for cell C5.
For cell B11, =(A11/2)*$C$3
For cell C11, =($C$5/A11)*$C$4
For cell D11, =B11+C11
Copy cells in row 11 all the way down to row 510 (order quantity 500 units).
For cell C7, =MIN(D11:D510)
For cell C8, (It is left to you to figure out a way so that Excel can automatically pick the best
order quantity with the minimum total inventory cost in cell C7.)
3