Novelty Medical Pacemakers, Inc. is experiencing some inventory control problems. The manager, Wanda Mollick, 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. Ms. Mollick maintains a safety stock of 200 units. (PLEASE SHOW YOU WORK).
a) What is Novelty Medical Pacemakers' current total annual inventory cost? (Hint: use current data to answer this question. Order size= 10,000 units, # of orders per year= 4 orders, sales in units= 40,000 units, order cost= $15 per order, carrying cost per unit= $1.50)
b) Calculate the economic ordering quantity (EOQ).
c) What is average inventory under EOQ if Ms. Mollick maintains a safety stock of 200 units?
d) Calculate total annual inventory cost under EOQ. How does this compare to her current inventory costs (see part a)?