A manufacturer keeps a continuous inventory review system on the key component, part X. The annual demand
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Question:
A manufacturer keeps a continuous inventory review system on the key component, part X. The annual demand on part X is 12,000 units and the demand rate is constant. The supplier charges $50 for each unit of part X. Each order costs $150 to process and annual holding cost per unit is 20% of the purchase price.
(a) What is the economic order quantity? How many orders will be placed each year (365 days)? If the lead time is 3 days, what is the reorder point?
(b) The supplier plans to offer discount on large orders in the following way:
Find out the optimal order quantity.
Order quantity (units) | Price per unit |
0 to 800 | $50 |
800 or more | $45 |
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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