A firm wishes to minimize annual inventory costs. The firm uses the EOQ model to determine the cost-minimizing order quantity and the reorder point.

Annual demand, units	22,100
Item cost, $ per unit	3.2
Ordering cost, $ per unit	12
Holding cost, annual rate	0.10
Operating days per year	365
Lead time, days	6

The firm will receive a 20 percent reduction in the cost of the item (lowered to $3.20 per unit) if the order quantity is at least 2,000 units. Should the firm accept the offer?

1) What is the annual inventory cost? (Round your answer to 2 decimal places).

2) What is the reorder point? (Round your answer to 2 decimal places).

3) Comparing your answer to Problem 1, should the firm accept the offer?

Answer rating: 100% (QA)

Thank you Lep D Annual on yearly clemand C cost of one uni... View the full answer