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Question
A company makes manufactures shoes. It produces 1 000 pairs of shoes per month. It buys the leather and components from a supplier at a cost of R20 per component kit. The company's inventory carrying cost is estimated to be 15% of the purchasing cost per tyre and the ordering is R50 per component kit.
You are required to calculate:
1. Calculate the EOQ.
2. What is the number of orders per year?
3. Compute the average annual ordering costs.
4. Compute the average inventory.
5. What is the average annual carrying cost?
6. Compute the total cost.
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