The following inventory data have been established to for the adler corp:
(1) Orders must be placed in multiples of 100 units
(2) Annual sales are 338,000 units
(3) The purchase price per unit is $3
(4) Carrying cost is 20% of the purchase price of goods
(5) Cost per order placed is $24
(6) Desired safety stock is 14,000 units. This amount is on hand initially
(7) Two weeks are required for delivery
Questions:
a) What is the EOQ
b) How many orders should the firm place each year?
c) At what inventory level should a reorder be made? Reorder point= (safety stock + weeks of delivery x weekly usage) - goods in transit
d) Calculate the total cost of ordering and carrying inventories if the order quantity is 1) 4,000 units, 2) is 4,800 units, 3) is 6,000 units. What are the total costs if the order quantity is the EOQ?
e) What are the EOQ and total inventory costs if 1) sales increase to 500,000 units 2) Fixed order cost increase to $30 and sales remain at 338,000 units 3) Purchase price increases to $4 . Leave sale and fixed costs at original values