Question 1:

The company orders 18,000 units of plastic bars on monthly basis. The purchase price of plastic bars is $1.25 per unit. Orders must be in a multiple of 200 units and will be delivered in 7 days after it is placed.

Additional costs involved are carrying cost per unit annually: 15% of the current purchase price; ordering cost $25 per order. Safety stock of 1000 units of plastic bars is always maintained.

Assume there are 360 days in a year. Determine:

i) Economic Order Quantity (EOQ)

ii) Number of orders place in a year

iii) Total inventory cost

iv) Level of reorder point

v) Average inventory