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Determine safety stock maximum

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Reference no: EM132567307

Imtiaz Super Store sells Blue Band Margarines. Its annual demand is 108,500 units. The shop incurs ordering cost of Rs 650/= order, irrespective of the order size. They buy it at Rs 150 per unit. The carrying cost is 12% on average inventory investment plus rent, insurance, property tax, and supervision for each unit is Rs 3. The maximum sale per day is 360 units. It takes 5 days to receive these items from supplier after placement of order quantities. The annual working days of Store are 350 days.

Required:

Question i. Determine the Economic order quantities (EOQ)

Question ii. Determine Safety stock maximum.

Question iii. Determine Reorder point levels

Question iv. Total annual inventory cost (Total annual ordering cost and total annual carrying cost)

Question v. A Supplier offers 1% discount to Imtiaz Supper Store, if they purchase the goods at least at 10,000 units at a time instead of above EOQ level (Part-i). Should they accept this offer? Please advice to management with relevant comparative workings.

Question vi. Why Economic order quantities may be wrong some time for any particular item to purchase in a given situation?

Reference no: EM132567307

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