Case - Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,200 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: order-processing costs, which were $52 per order without regard to size, and warehousing costs, which were $1.52 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis.

Question 1: Using the EOQ formula and the information contained in the Low Nail Case Study, how many kegs of nails should Low order at one time?

Question 1: Using the EOQ formula and the information contained in the Low Nail Case Study, how many kegs of nails should Low order at one time? 1a. = Annual use in units 1b. = Cost of placing an order 1000 1c. = Annual carrying cost per item per year 1d. = Additional carrying cost per item per year for half empty warehouse space Note: Warehouse space rented by Low is on average only half full. 1e. = Total annual carrying cost per item per year (including physical inventory and empty warehouse space 1f. = kegs per order Note: Warehouse space rented by Low is only half full on average !!! Orders per Year Order Size Annual Processing Costs ($) Annual Warehousing Costs ($) Total Annual Inventory Costs ($) 1g. 1h. Recommend to Mr. Low what he should do for his Inventory Management decision. Be clear to state why this is in his best interest