Q1: An auto parts store sells Super-brand batteries to dealers and auto mechanics. Yearly demand is about 1,200 batteries. The supplier pays $28 for each battery and estimates that the annual cost of holding is 30% of the value of the battery. The cost of placing an order is approximately $20 (administrative and clerical costs). The supplier currently orders 100 batteries per month.

Questions:

a. Determine the ordering, holding, and total inventory costs for the current order quantity.

b. Determine the economic order quantity (EOQ).

c. How many orders will be placed per year using the EOQ?

d. Determine the ordering, holding, and total inventory costs for the EOQ. How has ordering cost changed? Holding cost? Total inventory cost?

Q2: You are logistic manager in a manufacturing, in order to better balancing supply and demand, what basic information per costs has to concern when making inventory policy decisions? Please use example to illustrate your answer.