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The following information applies to water springs which

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The following information applies to Water Springs, which supplies landscaping waterfalls. Water Springs purchases the waterfalls from a manufacturer which has a reputation for very high quality in its manufacturing operation. The use a 365-day calendar throughout the company.

  • Annual demand      21,400 units
  • Lead time in days 10 days
  • Cost of placing an order $30/order
  • Cost for handing and storing inventory $2/unit
  • Cost (purchase price) $45/unit
  • Required rate of return 20%

a. What is the order quantity that minimizes the relevant ordering and carrying costs?

b. At what level of inventory should Water Springs reorder more inventory?

Reference no: EM13592705

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