Answered: Required: (Round up answer) Determine…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Question

Minalass Mfg. is involved in the production of machine parts. The company uses 500,000 pounds of steel annually. The current purchasing cost for steel is P2.20 per pound. The carrying cost for inventory is 20% of the purchase price. The cost of ordering steel is P1,000 per order. The company has decided to maintain a safety stock of 20,000 pounds. Delivery time per order is 10 days. The company works 365 days a year.

Required: (Round up answer)

Determine the optimal EOQ
How many orders will placed annually?
What is the average inventory
What is the inventory order point? (that is, at what level of inventory should a new order be placed)
What is the company’s total (relevant) inventory costs for the year?

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