Novelty Gifts is experiencing some inventory control problems. The manager currently orders 10,000 units four times each year to handle annual demand of 40,000 units. Each order costs $15 and each unit costs $1.50 to carry. She maintains a stock of 200 units.
a) What is the current total annual inventory cost?
b) Calculate the economic ordering qty (EOQ)
c) What is the average inventory under EOQ if she maintains a safety stock of 200 units?
d) Calculate the total annual inventory costs under EOQ. How does this compare to her current inventory costs?