Question
The annual demand for a certain product is 1500 units. The costs of placing an order are estimated to be OMR 45 per order
The annual demand for a certain product is 1500 units. The costs of placing an order are estimated to be OMR 45 per order and the annual carrying cost is 20% of the cost of the item. The cost varies depending on the quantity ordered each time. The number of working days in a year is 280. a) b) c) d) Order Quantity 1 to 199 200 to 299 300 or more Cost per item 18 17 16.5 What is the optimal order quantity the company should use each time it places an order, so as to minimize the total cost. What is the length of order cycle (time between orders) using the optimal order quantity computed in part (a). The company is currently following a policy of ordering once at the beginning of each month. How much is the company losing every year due to this policy? If the lead time is 20 days, what is the reorder point?
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Cost Accounting
Authors: William K. Carter
14th edition
759338094, 978-0759338098
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