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Determine economic order quantity and annual inventory costs

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Reference no: EM131121914

General Cereal Company purchases various grains (e.g., wheat and corn) that it processes into ready-to-eat cereals. Its annual demand for wheat is 250,000 bushels. Assume that demand is uniform throughout the year. The average price of wheat is $3.0625 per bushel (delivered). Annual inventory carrying costs are 16 percent of inventory value. The costs of placing and receiving an order are $98. Assume that inventory replenishment occurs virtually instantaneously. Determine the following:

a. Economic order quantity

b. Total annual inventory costs of this policy

c. Optimal ordering frequency

Reference no: EM131121914

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