EOQ and inventory cost. Horthern Appliance store sells about 375 console model 25-inch televsion sets per year. The price of the sets is $800 and the unit cost the store $600 each. Cost of ordering are $125 per order and carrying costs are 25 percent of unit cost, comprised mostly of insurance and financing costs for inventory. Required: a) Compute the economic order Quantity b) Compute the total cost of the inventory

EOQ and inventory cost. Horthern Appliance store sells about 375 console model 25-inch televsion sets per year. The price of the sets is $800 and the unit cost the store $600 each. Cost of ordering are $125 per order and carrying costs are 25 percent of unit cost, comprised mostly of insurance and financing costs for inventory. Required: a) Compute the economic order Quantity b) Compute the total cost of the inventory

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 19PROB

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Sterling Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An order to replenish the part requires a lead time of five days. Required: 1. Calculate the reorder point, using Equation 20.3. 2. Graphically display the reorder point, where the vertical axis is inventory (units) and the horizontal axis is time (days). Show two replenishments, beginning at time zero with the economic order quantity in inventory. 3. What if the average usage per day of the part is 500 units but a daily maximum usage of 575 units is possible? What is the reorder point when this demand uncertainty exists?
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