Continuous review inventory control is being applied

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Reference no: EM1384688

Continuous review inventory control is being applied to purchase motors for an electric fan manufacturer. Demand is uniformly distributed between 500 and 600 motors per week. Each order costs $250 to prepare, place, and receive. Motors cost $2.75 and the holding cost rate is 1% per week. Management proposes using the EOQ order quantity and setting reorder points to ensure a 97% fill rate. Find the imputed cost of a shortage and the expected number of shortages per year.

Reference no: EM1384688

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