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How are the total inventory cost and storage cost related

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Reference no: EM132562062

New Life Limited uses 15material of "K" for its regular production of a smart Soap.

New life monthly demand of their Soap "NAA LAMIORKOR" is 7,500 units which cost $20 per unit. The company intends making 20% profit on the cost of the soap. The purchase price of the material "K" is the profit on each unit of the soap. Half of the profit on each soap is spent to keep a unit of the material in store per annum. It cost New Life $40 to make an order.

Required:

Question i) Determine the Economic Order Quantity of material "K" to meet the annual demand of the "NAA LAMIORKOR"

Question ii) What is the storage cost in the period?

Question iii) Estimate the total inventory cost .

Question iv) In terms of values obtained above how are the total inventory cost and storage cost related?

Reference no: EM132562062

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