Question

Stephanie Robbins is attempting to perform an inventory analysis on one of her most popular products. Annual demand for this product is​ 5,000 units; carrying cost is​ $50 per unit per​ year; order costs for her company typically run nearly​ $30 per​ order; and lead time averages 10 days.​ (Assume 250 working days per​ year.) ​a) The economic order quantity is ​b) The average inventory is ​c) The optimal number of orders per year is ​d) The optimal number of working days between orders is ​e) The total annual inventory cost​ (carrying costordering ​cost) is ​ ​f) The reorder point is

Answer 1

Given :

The annual demand,
units

Ordering cost,

Carrying cost,

Lead time, L = 10 days

Number of days per year = 250 days

So, average demand is d =
days

=
= 20 units

a). The economic order quantity, Q =

= 77 units

b). Average inventory =

≈ 39 units

c). Number of orders per year =

= 65 units

d). Time between orders =
x number of days per year

= 3.85

e). Annual ordering cost =

= $ 1948.05

Annual carrying cost =

= $ 1925

Total annual cost of inventory = $ 1948.05 + $ 1925

= $ 3873.05

f). Reorder point =

units