Inventory Exercise II

An operations manager is considering the ordering policy for a standard product which faces demands

with very little $($negligible$)$ variability. The firm estimates that the demand for the product is $12000$ units

per year and they can acquire each unit at a cost of $$10.$ The fixed ordering cost is $$1000.$ The firm

estimates its cost of capital at $6\%$ per year and the cost of physically storing a unit for one month is $$0\mathrm{.}5.$

The manager observes that the EOQ model is the appropriate model in this setting.

Determine the economic order quantity for this product?

What is the corresponding annual cost?

What is the corresponding inventory turnover rate?

MAN $341$

Inventory Exercise III

The store manager for a retail outlet is considering a new product for the coming winter season. The

product can be acquired at $$120$ and the selling price during the season will be $$150.$ Past experience on

similar products indicate that the leftover units can be sold at the end of the season with a deep

discount at a salvage value of $$70.$