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):
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
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