Crawford Steel Corp. buys inventory of 40,000 units annually. The purchase price per unit is $3.00 and delivery time takes 2 weeks after the order is placed. The ordering cost is $40 per order. The storing and insurance cost of the inventory per quarter is 20 percent of the purchase price. Based on the sales records, it normally maintains its safety stock of 4,500 units. Order should be placed in 100 units and 50 weeks is in a year. Calculate: the economic order quantity. the total cost of holding inventory. the inventory level should reorder be made. the number of orders that will be placed annually.
Crawford Steel Corp. buys inventory of 40,000 units annually. The purchase price per unit is $3.00 and delivery time takes 2 weeks after the order is placed. The ordering cost is $40 per order. The storing and insurance cost of the inventory per quarter is 20 percent of the purchase price. Based on the sales records, it normally maintains its safety stock of 4,500 units. Order should be placed in 100 units and 50 weeks is in a year. Calculate: the economic order quantity. the total cost of holding inventory. the inventory level should reorder be made. the number of orders that will be placed annually.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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Crawford Steel Corp. buys inventory of 40,000 units annually. The purchase price per unit is $3.00 and delivery time takes 2 weeks after the order is placed. The ordering cost is $40 per order. The storing and insurance cost of the inventory per quarter is 20 percent of the purchase price. Based on the sales records, it normally maintains its safety stock of 4,500 units. Order should be placed in 100 units and 50 weeks is in a year. Calculate:
- the economic order quantity.
- the total cost of holding inventory.
- the inventory level should reorder be made.
- the number of orders that will be placed annually.
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