Playfair Limited is a company that purchases toys from abroad for resale to retail stores on...

 

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Playfair Limited is a company that purchases toys from abroad for resale to retail stores on credit. The company is concerned about its inventory (stock) management operations. It is considering adopting a stock management system based upon the economic order quantity (EOQ) model. The company's estimates of its inventory management are shown below. Carrying cost (holding cost) of inventories as a percentage of purchase cost of toys per year Storage costs Insurance 3+ 1 Handling 1 Obsolete inventory 3 Opportunity costs of funds invested in inventory 10 18 The purchase price of the toys to Playfair Limited is R4.50 per unit. Fixed costs associated with placing each order for inventory are R311.54. There is a two-week delay between the time that new inventory is ordered from suppliers and the time that it arrives. The toys are sold by Playfair Limited at a unit price of R6.30. The variable cost of selling the toys is R0.30 per unit. Demand from Playfair Limited's customers for the toys 520 000 units per year. REQUIRED: Calculate the optimum order quantity of inventory for Playfair Limited over a one-year planning period using the EOQ model. Playfair Limited is a company that purchases toys from abroad for resale to retail stores on credit. The company is concerned about its inventory (stock) management operations. It is considering adopting a stock management system based upon the economic order quantity (EOQ) model. The company's estimates of its inventory management are shown below. Carrying cost (holding cost) of inventories as a percentage of purchase cost of toys per year Storage costs Insurance 3+ 1 Handling 1 Obsolete inventory 3 Opportunity costs of funds invested in inventory 10 18 The purchase price of the toys to Playfair Limited is R4.50 per unit. Fixed costs associated with placing each order for inventory are R311.54. There is a two-week delay between the time that new inventory is ordered from suppliers and the time that it arrives. The toys are sold by Playfair Limited at a unit price of R6.30. The variable cost of selling the toys is R0.30 per unit. Demand from Playfair Limited's customers for the toys 520 000 units per year. REQUIRED: Calculate the optimum order quantity of inventory for Playfair Limited over a one-year planning period using the EOQ model.

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