Solution-Calculate the revised annual total inventory costs

Calculate the revised annual total inventory costs

Reference no: EM132561433

A business currently orders 1,000 units of product ZETA at a time. It has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity. Information regarding inventories is given below:

Purchase price K15 per unit

Fixed cost per order K200

Holding cost 8% of the purchase price per annum

Annual demand 12,000 units

Current annual total inventory costs are K183,000, being the total of the purchasing, ordering and holding costs of product ZETA.

Required:

Question (a) Calculate the Economic Order Quantity.

Question (b) Using your answer to (a) above calculate the revised annual total inventory costs for product ZETA and so establish the difference compared to the current ordering policy.

Question (c) Describe ways in which discounts might affect this Economic Order Quantity calculation and subsequent inventory costs

Reference no: EM132561433

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Calculate the revised annual total inventory costs

Reference no: EM132561433

Reference no: EM132561433

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