Your company currently orders 5,000 units four times each year to handle annual demand of 20,000 units. Each order costs $15 and each unit costs $1.50 to carry. Your policy is to maintain a safety stock of 200 units.

Required

1. What is the current total annual inventory cost? 3 Marks
2. Calculate the economic ordering quantity (EOQ) 2 Marks
3. What is average inventory under EOQ assuming a safety stock of 200 units 2 Marks
4. Calculate total annual inventory cost under EOQ. 3 Marks
5. Explain your findings and Recommendations in report to the General Manager who is not an expert in Finance or Supply Chain 5 Marks