HTC is able to negotiate a reduction in the fixed ordering costs

to $250.00 per order, but HTC decides to carry a safety stock of 14 days of memory chip sales.

With the reduced fixed ordering cost and the increased average inventory due to the safety stock

carried, what is the additional total inventory costs due to the decision to balance out uncertainty by

carrying the specified safety stock?

Use the following data to answer: (HTC) expects to order 295,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $325 per order; the purchase price per chip is $32; and the firms inventory carrying costs is equal to 18 percent of the purchase price.

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