a. annual usage of units $125,000
b.ordering costs if $100 per order
c. carrying cost of 20% of the cost of inventory
d. cost of one unit $110

1. what is the economic ordering quantity?
2. how many orders will be placed during the year?
3. what will the average inventory be?
4. what is the total cost of inventory expected to be?
If the company can reduce the ordering costs by $12.50 by the use of automation and the carrying cost by 25% by reduction of insurance costs, what would the answers be to the above questions?

Solution Preview

Annual usage/demand, A = $125,000 (in terms of $) convert this into units
A = $125,000/price per unit = $125,000/$110 = 1136.37 ~ 1137

Cost per unit, P = $110
Ordering cost, S = $100 per order
Holding cost rate, c = 20% per annum

Inventory carrying cost, I = price per unit*holding cost rate = $110*20% = $22 per unit per ...

Solution Summary

Solution shows calculations of:
1. Economic ordering quantity
2. Number of orders.
3. The average inventory
4. Total cost of inventory

A company expects to order 126K memory chips for inventory during the coming year and it will use this inventory at a constant rate. Fixed ordering costs are $200 per-order; the purchase price per chip is $25 and the firm's inventory carrying cost is equal to 20% of the purchase price (Assume 360 day year)
At the EOQ what is

What is the best ordering policy for a warehouse to minimize cost, while meeting demands?
The warehouse has a limited storage capacity of 50000 cubic meters (m3) and a budget of $30,000.

Please use the attached excel worksheet to answer the problem.
William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics:
Demand D = 19, 500 units/year
Ordering cost S = $25/order
Holding cost H = $4/unit/year
a) Calculate the EOQ for the workbooks.
b) What are the

Inventory Control
1)What are costs associated with inventory?
2)Why is controlling turnover in the inventory important?
3) How can improvements in inventorymanagement impact profitability?

A warehouse sells 4 products with a different demand for each product. Each product has a different holding cost and requires a certain amount of space. What should the ordering policy for the warehouse be, given its limited storage capacity?

Problem 6-20
Note: Please review the PowerPoint Slides using the link below:
http://wps.prenhall.com/bp_render_qam_9/0,11119,2557279-,00.html
Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which ha

A store (open 24 hours a day, every day) sells 8-roll packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $.50 per 8-roll pack. The cost to place an order is $20. It takes four days for an order to arrive. Currently, S

Fisk Corporation is trying to improve its inventory control system and has installed an on-line computer at its retail stores. Fisk anticipates sales of 75,000 units per year, an ordering cost of $8 per order, and carrying costs of $12.0 per unit.
What is the economic ordering quantity?
How many orders will be placed durin

Annual demand is 4000 units the cost is $90, the inventory carrying cost is 10% of each unit. The average ordering cost is $25. Demand per week is 80
What is the EOQ? What is the ROP?
What is the average inventory, what is the annual holding cost?
How many orders per year would be placed, what is the annual ordering cos