Sky Castle has been buying product Alhambra in lots of 1,200 units which represents a four month’s supply. The cost per unit is P220. The order cost is P200 per order; and the annual inventory carrying cost per one unit is P25. Assume that the units will be required evenly throughout the year.

 Required: Calculate the following (show your solution):

 1. Economic Order Quantity 

2. Number of orders in a year 

3. Average inventory based on the economic order quantity 

4. Total carrying costs, ordering costs, and relevant inventory costs at economic order quantity 

Problem 4 – Reorder point, lead time quantity, safety stock quantity 

The following information is available for Imooji Company’s Material BSA-2020: Annual usage 10,000 units Working days per year 250 days Normal lead time in working days 30 days Maximum lead time in working days 70 days 

Required: Compute the following (show your solution): 

1. Lead time quantity

2. Safety stock quantity 

3. Reorder point