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Susan Burns operates a factory that manufactures corn starch, corn flakes and popcorns. One of the major raw materials used is corn, which she buys

Susan Burns operates a factory that manufactures corn starch, corn flakes and popcorns. One of the major raw materials used is corn, which she buys for $10 per kilogram. The factory operates 340 days each year. The following information has been provided:

Annual usage of corn 100,000 kilograms

Average time between placing

and receiving orders 4 days

Estimated cost of ordering and

receiving inventory (per order) $7

Estimated annual cost of carrying

a kilogram of corn in stock. $0.70

In the above case calculate:

  1. What is the Economic order quantity (EOQ).
  2. What should be the number of orders per year.
  3. What are the different types of inventory management system Susan can adopt. Discuss the advantages and disadvantages of different inventory management system. Write in your own words?

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