Reference no: EM133368234

Questions

1. With the help of a graph, critically explain the inventory related costs in an organisation.

2. A local electrical retailer has a problem in managing his inventory due to low inventory turnover that is squeezing profit margins and causing cash flow problems. One of the top selling SKU (stock keeping unit) in the retail store is a coffee making machine. Sales are 5400 units per year and the supplier charges $60 per unit. The cost of placing an order with the supplier is $45. Annual holding costs are 25% of the coffee making machine's value, and the store operates 360 days per year. Lead-time is four days. The owner of the store chose a 300-unit lot size so that new orders could be placed less frequently.

a. Determine the EOQ.

b. How much total annual cost is saved if the EOQ quantity is ordered?

c. What is the optimal number of orders per year?

d. At what point, should the retailer reorder the coffee making machines from the supplier?

e. Calculate the flow rate and explain it.