A firm expects to sell 10,000 units of its product annually. It estimates that i

Question

A firm expects to sell 10,000 units of its product annually. It estimates that it costs $200 to place an order and that each unit costs $7 annually to carry in inventory. It takes 7 days to receive an order once it is placed, and the store is open 365 days per year.

a) How many units should the firm order at a time if it wants to minimize the sum of ordering and carrying costs?

b) How many orders will it place in a year?

c) What will its average inventory level be during the year?

d) What is its reorder point?

Explanation / Answer

a. Firm should order=755.9289 or 756

b. Orders in a year=10000/756=13.22

c. inventory level=200*10000/756+ 7*756/2=5291.5026

d.orders per year=10000/756=13.22

orders cycle time=365/13.22=27.6

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.