Reference no: EM132699015
Case Problem-Inventory Management
The current policy is to order 24 times per year, ordering 3,000 units each time. A company faces a constant demand of 72,000 units per year. Its order cost is $180 per order and the cost of holding inventory is $50 per unit per year.
1. What is the annual ordering cost under the current policy?
2. What is the annual holding cost of this policy?
3. What is the annual total cost (annual holding cost plus annual ordering cost) under this policy?
4. What is the numerical value of the economic order quantity (EOQ)?
5. What is the optimal number of orders per year?
6. What is the optimal value of the annual ordering cost?
7. What is the optimal value of the annual holding cost?
8. What is the sum of the optimal annual holding cost and the optimal annual ordering cost?
9. How much would be saved each year by using the optimal policy instead of the current policy?
10. How much is this in percentage of the current annual costs under the current policy (to the nearest percent)?
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Case problem-inventory management
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