Question
Sunflower Corp. plans to order 126,000 calculator batteries for inventory in the coming year. This inventory will be used at a constant pace. The fixed
Sunflower Corp. plans to order 126,000 calculator batteries for inventory in the coming year. This inventory will be used at a constant pace. The fixed ordering costs are P200 per order, the selling price per chip is P25. According to the record, firm's inventory carrying costs are 20% of the purchase price. Assume 360 days in a year.
a. What is the economic ordering quantity for batteries?
b. If Sunflower holds a safety stock equal to a 30-day supply of batteries, what is its average inventory level?
c. Assume that Sunflower holds a safety stock equal to a 30 day supply of batteries. What is the maximum amount of inventory that will have on hand at any time, that is, what will be the inventory level right after a delivery is made?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
10th edition
978-0077511388, 78034779, 9780077511340, 77511387, 9780078034770, 77511344, 978-0077861759
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