What is the total inventory cost

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Reference no: EM131838828

Problem

Acme Company has sells a product that has an annual demand of 180 units. Ordering cost is $20.00 per order, and annual inventory cost is 25%. The product can be purchased from a supplier to using the following price-quantity discount table:

Order size Discount Unit Cost (net of discount)

0 to 49 0% $30.00

50 to 99 5% $28.50

100 or more 10% $27.00

1. Assume that the current inventory policy of the company is to order once per month. What is the total inventory cost (holding + ordering + purchase) at this current practice?

2. What recommendation would you give to Acme regarding its current ordering policy - keep ordering at the same level, or change the order size? Provide support to your answer. Be as clear and as specific in your analysis.

Reference no: EM131838828

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