ONLY ANSWER IF YOU KNOW PLEASE, please check my answer You\'re managing the inve

Question

ONLY ANSWER IF YOU KNOW PLEASE, please check my answer

You're managing the inventory of a regional hospital and one of your most critical iterns has an annual demand of 6,000 units per year. 2 The unit cost is $100; the holding cost is $10 per unit per year and the ordering cost is $30 per order. a. Determine the ordering quantity that minimized ordering and holding costs. 4 9 b. determine the total annual inventory cost of this item 10 12 13 ic. How many orders will you place in 1 year? 14 15 16 18 EOQ (5pts EPO(5 pts)hnonRun to

Explanation / Answer

a. EOQ = square root of (2DS/H)

D = demand, S = fixed cost of each order (ordering cost), H = holding costper unit

EOQ = square root of ((2 X 6000 X 30)/10) = 189.73 = 190 units

b. Total annual inventory cost = PD + HQ/2 + SD/Q

P = price per unit, D = demand, Q = quantity ordered each time, S = fixed cost of each order (ordering cost), H = holding costper unit

At EOQ, i.e. Q = 190

Total annual inventory cost = 100X6000 + (10X190)/2 + (30X6000)/190 = 601897.4

c. Orders in 1 year = D/Q = 6000/190 = 31.57, or, 32 times.

Your answer for part b, is a little different because of the approximation taken (31.58 taken as 32). As this a cost, it will be accounted with exact decimals (31.58), rest of the inventory will spill over to next Financial year.

But ordering activity is discrete, so you need to order 32 times to meet the demand of 6000 units at EOQ, else there will be a shortfall.

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