- 7 Marks
FM – L2 – Q109 – Inventory Management
Calculate the EOQ for an item with given demand, costs, and holding expenses to minimize annual costs.
Question
Entity G uses 105 units of an item of inventory every week. These cost GH₵150 per unit. They are stored in special storage units and the variable costs of holding the item is GH₵4 per unit each year plus 2% of the inventory’s cost.
Required
(a) If placing an order for this item of material costs GH₵390 for each order, what is the optimum order quantity to minimise annual costs? Assume that there are 52 weeks in each year.
(b) Suppose that the supplier offers a discount of 1% on the purchase price for order sizes of 2,000 units or more. What will be the order size to minimise total annual costs?
Find Related Questions by Tags, levels, etc.
Report an error
