Thomas Smith is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a daily demand of 24 units. The cost of each unit is £100, and the inventory carrying cost is £10 per unit per year. The average ordering cost is £30 per order. It takes about 5 days for an order to arrive, and there are 250 working days per year. 

a) To minimize the cost, how many units should be ordered each time an order is placed? What is the total annual inventory cost, including the cost of the units? (10%)

 b) Even if there is substantial uncertainty in the parameters in the EOQ-model, it is still quite a useful model. Discuss why. (10%)          

Answer rating: 100% (QA)

d 24 unitsday Cost 100 H 10unitye... View the full answer