Sunflower Corp. plans to order 126,000 calculator batteries for inventory in the coming year. This inventory will
Question:
Sunflower Corp. plans to order 126,000 calculator batteries for inventory in the coming year. This inventory will be used at a constant pace. The fixed ordering costs are P200 per order, the selling price per chip is P25. According to the record, firm's inventory carrying costs are 20% of the purchase price. Assume 360 days in a year.
a. What is the economic ordering quantity for batteries?
b. If Sunflower holds a safety stock equal to a 30-day supply of batteries, what is its average inventory level?
c. Assume that Sunflower holds a safety stock equal to a 30 day supply of batteries. What is the maximum amount of inventory that will have on hand at any time, that is, what will be the inventory level right after a delivery is made?
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe