Question 1

Danish Manufacturing is involved in the production of machine parts. The company uses 50,000 pounds of steel annually. The current purchasing cost for steel is RM2.20 per pound. The carrying cost for inventory is 20 percent of the purchase price. The cost of ordering is RM100 per order. The company has decided to maintain a safety stock of 2000 pounds of steel. The delivery time per order is 10 days. The company works 360 days in a year.

a) Calculate the EOQ b) How many orders will be placed annually? c) What is the average inventory? d) What is the reorder point? e) What is the companys total inventory cost for the year?