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What is the total annual order cost and carrying cost

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Reference no: EM133104813

Question - The BOF Company has in the past ordered raw material "X" in quantities of 3,125 units, which is 13 weeks supply. Management has decided to change over to an ordering system based on economic order quantities. Assume the following information pertaining to the company's purchasing and production activity:

Inventory usage rate: 120 - 130 units per week

Lead time: 2 - 4 weeks

Unit price: $1.50

Order cost: $5 per order

Carrying cost: $0.50 per unit per year

Required -

(a) Calculate the Economic Order Quantity (EOQ) using the formula?

(b) Calculate the re-order level?

(c) Calculate the maximum level?

(d) Calculate the minimum level?

(e) What is the total annual order cost and carrying cost at the EOQ?

(f) How much would the company save by adopting the EOQ model?

Reference no: EM133104813

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