Question
Montaz is an Italian automotive repair company located in America. The company has an inventory policy to purchase 9000 units of car tires for its
Montaz is an Italian automotive repair company located in America. The company has an inventory policy to purchase 9000 units of car tires for its annual needs by ordering regularly every month. Each tire unit costs ($25). The ordering cost per order is ($19) and the holding cost per unit is 15% of the price of each tire unit. You as a manager are assigned to suggest a more economical inventory policy for the company by providing advice on a new inventory policy. Assume 1 year = 12 months = 52 weeks. 1. How many tires should the company buy for each order? What are the total carrying costs and total ordering costs per year for the company's current inventory policy? 2. How many tires should be purchased for each order (EOQ) in order to achieve an optimal inventory policy? With this optimal policy, how many times must the company place an order in one year? What are the total carrying costs and total ordering costs per year for the company's new inventory policy? 3. How much money could Montaz save per year by implementing the new, more optimized inventory policy?
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