Remove from low inventory problem
(a) What is the quantity ordered each time?
(b) When to order?
(c) What should be the best inventory level before receiving the material order?
Annual Consumption 12000 units (360 days)
Cost per unit Rs. 1
Order Cost - Rs.12
Inventory Collection Expense 24%
normal time interval 15 days
Security Wing 30 days
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(a)Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ)The Economic Order Quantity (EOQ) is the number of units that a company should add to inventory with each order to minimize the total costs of inventory—such as holding costs, order costs, and shortage costs. The EOQ is used as part of a continuous review inventory system in which the level of inventory is monitored at all times and a fixed quantity is ordered each time the inventory level reaches a specific reorder point.
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