Ordering Cost, Carrying Cost, and Total Inventory-Related Cost

Ranger Company purchases 17,280 units of Product Beta each year in lots of 864 units per order. The cost of placing one order is $10, and the cost of carrying one unit of product in inventory for a year is $6.

Required:

1. How many orders for Beta does Ranger place per year? orders

2. What is the total ordering cost of Beta per year? $

3. What is the total carrying cost of Beta per year? $

4. What is the total cost of Ranger's inventory policy for Beta per year? $

Safety Stock; Reorder Point

Pohling Company makes a variety of household appliances, including automatic can openers. Small motors used in making can openers are purchased from an outside supplier. Each year, 20,000 small motors are used, at the rate of 80 small motors per day. However, some days as many as 88 small motors are used. It takes Pohling 5 days from the time of order to the time of arrival of the order.

Required:

1. Calculate the reorder point without safety stock. units

2. Calculate the amount of safety stock. units

3. Calculate the reorder point with safety stock. units