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Question - Due to the small size of the test lab, the facility does not have much space to store the test kit needed at the optimal order size of 289.The consulting agency feels the facility needs to reduce the optimum order size in half. This charge will be much easier to store I the facility and the charge will require more frequent deliveries from the supplier. For this reduced lot size to be optimal the consultant agency will need to evaluate and reduce the ordering cost to support more frequent ordering. The consulting can calculate the following cost from the past years performance.
Unit Cost per Test Kit = $250
Average monthly test kit use = 1660
Inventory Holding Costs per year as a faction of unit cost (capital, obsolescence, handling, occupancy, other) = 20%
How much should the ordering cost be?
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