Question

Rick Jerz is attempting to perform an inventory analysis on one of his most popular products. Annual demand for this product is 5,500 units; carrying cost is $55 per unit per year; order costs for his company typically run nearly $30 per order; and the lead time averages 11 days.  (Assume 250 working days per​ year.)

a)

The economic order quantity is __ units

b)

The average inventory is __ units

c)

The optimal number of orders per year is ___ orders

d)

The optimal number of working days between orders is ___ days

e)

The total annual inventory cost is $___

Answer 1

As per the question,

Annual Demand = 5500 units

Carrying Cost= 55 per year

Ordering Cost = 30 per order

a)

b)

c)

d)

note: no.of orders=Annual Demand/EOQ= 5500/77.45=71

e)