Reference no: EM133087860

Question - A petrol station in Papine has hired a Utech graduate, Derval Watts to bring some order to the chaos that existed in the ordering and inventory control of lubricants. Derval called the finance department and was told that for the purpose of his analysis, the appropriate holding cost for lubricants is 24% per year. The demand per month is 208 cases. At a cost of $6.32 per case, the cost for ordering the lubricants is estimated to be $83 per order. Lead time is 5 days and petrol station is opened every day except Christmas day.

1. How many cases of lubricants do you recommend that Derval order every time he places an order. 

2. Determine the estimated holding cost; and ordering cost.

3. Would it be true to say it takes Derval approximately 76 days between orders. Justify your answer.

4. How many orders will Derval have placed each year?

5. Determine the re-order point.

6. What can Derval expect his Total Annual cost to be?