Solution-Compute the company total annual inventory costs

Compute the company total annual inventory costs

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Reference no: EM132757691

Question - The following information pertains to AAA Manufacturing Company's Product X:

Annual Demand 33,750 units

Annual cost to hold one unit of inventory P15

Setup cost (or the cost to initiate a production run P500

Beginning inventory of Product X 0

At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X.

Required -

1) At present, compute the company's total annual inventory costs?

2) If the EOQ model is used, compute the economic lot size?

3) If the EOQ model is used, compute the number of production runs?

4) If the EOQ model is used, compute the total annual inventory costs, compared with that under present system, will increase (decrease) by?

Reference no: EM132757691

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Compute the company total annual inventory costs

Reference no: EM132757691

Reference no: EM132757691

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