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BUSN - A firm is faced with the attractive situation in which it can obtain




Question;A firm is faced with the attractive situation in which it can obtain immediate delivery ofan item it stocks for retail sale. The firm has therefore not bothered to order the item inany systematic way. However, recently profits have been squeezed due to increasingcompetitive pressures, and the firm has retained a management consultant to study itsinventory management. The consultant has determined that the various costsassociated with making an order for the item stocked are approximately $70 per order.She has also determined that the costs of carrying the item in inventory amount toapproximately $27 per unit per year (primarily direct storage costs and forgone profit oninvestment in inventory). Demand for the item is reasonably constant over time, and theforecast is for 16,500 units per year. When an order is placed for the item, the entireorder is immediately delivered to the firm by the supplier. The firm operates 6 days aweek plus a few Sundays, or approximately 320 days per year. Determine the following:a. Optimal order quantity per orderb. Total annual inventory costsc. Optimal number of orders to place per yeard. Number of operating days between orders, based on the optimal ordering.


Paper#52336 | Written in 18-Jul-2015

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