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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

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    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

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