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What is the annual cost of current ordering policy

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Reference no: EM132817737

SteelCase Furniture Company uses steel at a fairly steady rate of 50 tons per week. Assume there are 50 weeks per year. They purchase the steel from BainBridge Steel Company at a cost of $600 per ton. SteelCase estimates that there is a fixed cost (transportation, order processing, etc.) of $1500 for every order that they place with BainBridge and uses an annual carrying cost rate of 8%. Currently, they receive an order every four weeks.

1. What is the annual cost of their current ordering policy?

2. What is the order quantity that would minimize their annual cost?

3. Estimate the savings that SteelCase could realize by moving to the optimal policy.

Reference no: EM132817737

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