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