Solution-Calculate the total ordering and holding cost

Calculate the total ordering and holding cost

Reference no: EM132596104

a. Although lower inventories and a just-in-time approach receive considerable attention in the business media, firms in the Fast-Moving Consumer Goods (FMCG) industry still prefer high levels of inventory. Use relevant examples from industry and justify why the companies still have a tendency to hold a large number of inventories.

b. A store has collected the following information on one of its products:

Demand = 5,000 units/year

Ordering costs = $12/order

Holding costs = $4/unit/year

Lead-time = 5 days weeks

Unit cost = $748/unit

Number of weeks per year = 50 weeks

Question i. The firm currently orders 500 units per order. Calculate the total ordering and holding cost of these goods under this system.

Question ii. Determine the economic order quantity (EOQ) and the ordering and holding cost using the EOQ.

Question iii. Generate the efficiency ratio and advice the company's management team for the amount of saving.

Reference no: EM132596104

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Calculate the total ordering and holding cost

Reference no: EM132596104

Reference no: EM132596104

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