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Lownie Limited uses 7 , 2 0 0 units of material T - 9 5 each year. The material is used evenly throughout the year
Lownie Limited uses units of material T each year. The material is used evenly throughout the year in the companys production process. A recent cost study indicates that it costs $ to carry one unit in inventory for a year. The company estimates that the cost of placing an order for material T is $
On average, it takes days to receive an order from the supplier. Sometimes orders do not arrive for days, and at rare intervals about of the time they do not arrive for days. Each unit of material T costs the company $ Lownie Limited works an average of days per year.
Required:
Compute the EOQ.
a What size safety stock would you recommend for material TRound your answer to decimal places.
What is the reorder point for material T in units assuming aday safety stock, and bday safety stock?
Compute the total cost associated with ordering and carrying material T in inventory for a year assuming aday safety stock, and bday safety stock. Do
not include the $ purchase cost in this computation.
day safety stock day stock
Total Annual Cost
Carruomg cost of inventory
Refer to the original data. Assume that as a result of adopting JIT purchasing policies, the company is able to reduce the cost of placing a purchase order to only $ Also assume that after considering the waste and inefficiency caused by inventories, the actual cost of carrying one unit of material T in inventory for a year is $
a Compute the new EOQ. Round your final answer to the nearest whole number.
b How frequently would the company place a purchase order, as compared to the old purchasing policy? Round your answers to decimal place.
Old Policy days New Policy days
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