Let us suppose the demand at a firm is 200 units per month. The firm orders...

Let us suppose the demand at a firm is 200 units per month. The firm orders 80 units each time. How many times does the firm place an order per year? What is the average inventory level at this firm?

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Expert Solution

Let us suppose the demand at a firm is 200 units per month.

Then annual demand = monthly demand * 12 = 200 units *12 = 2,400 units

Order quantity per order = 80 units

Number of order per year = Annual demand / Order quantity per order

= D/ Q = 2,400 units / 80 units =30 orders per year

The average inventory level = Order quantity per order / 2

= 80 units / 2 = 40 units

Therefore the firm place an order 30 times per year and the average inventory level at this firm is 40 units.

keosha answered 1 year ago

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