The fixed ordering costs are 0.3*x for 10 grams of gold, and the holding cost for
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The fixed ordering costs are £ “0.3*x” for 10 grams of gold, and the holding cost for the same quantity is £0.4 per year. Assume the manufacture's weekly requirement is in average “x * 10kg” but may go up to “(x + 2) * 10kg”. The current average gold price is £26/gram. The lead time for ordering is usually 5 days.
a. Evaluate how much gold you should purchase at once.
b. Decide how often you need to order.
c. Calculate the safety stock and explain its usefulness.
Related Book For
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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