Question

*Please note - these are new numbers from the previous problems* A product has an annual demand of 15,696 units. The unit price is $52 each and the ordering cost is $71. The store uses a yearly inventory holding cost of 20% of the unit price. The company has decided to order 46 units every time they order and to order 92 times per year. There are 250 business days in a year. How many days should they wait between orders

Answer 1

The company should wait 2.72 days.

Step-by-step explanation:

a) Data and Calculations:

Annual demand = 15,696 units

Unit price = $52

Ordering cost = $71

Inventory holding cost = 20% of $52 = $10.40 per unit

Determined order quantity = 46 units

Number of orders per year = 92 times

Total quantity that can be ordered = 4,232 (46 * 92)

This implies that there should be inventory of 11,464 at the beginning of the period (15,696 - 4,232)

The days to wait between orders = 2.72 days (250/92)