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# Inventory Management and Demand

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Company A's demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total \$38 per order. The annual holding cost rate is 26% of the value of the inventory. The per-unit cost of inventory is \$12.

Company B's demand is uniform throughout the year and totals 15,000 units per year. The production setup costs total \$84 per setup. The annual holding cost rate is 28% of the value of the inventory. The per-unit cost of finished product is \$19. The production rate is constant and equivalent to 60,000 units per year.
1. Determine the order size for Company A in the given scenario that would minimize total annual cost by using the economic order quantity model, showing all of your work.
2. Determine the lot size for Company B in the given scenario that would minimize total annual cost by using the economic production lot size model, showing all of your work

#### Solution Preview

Company A's demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total \$38 per order. The annual holding cost rate is 26% of the value of the inventory. The per-unit cost of inventory is \$12.

Company B's demand is uniform throughout the year and totals 15,000 units per year. The production setup costs ...

#### Solution Summary

The expert examines inventory management and demand.

\$2.19