What is the annual inventory holding cost

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Reference no: EM132200025

OCB Inc specializes in selling fair trade organic coffee beans in 1 lb bags. The bags are kept in a cool dry room. The holding cost for each bag is $1.40. The cost to place an order with the various suppliers works out to $35. The lead time is 5 days and OCB sells 7,000 bags of coffee per year to its customers. OCB uses 250 working days per year in its operations. (20 marks)

i) What is the optimal order quantity (EOQ)?

ii) What is the average inventory? Hint: Use the EOQ calculated in i).

iii) What is the annual inventory holding cost?

iv) How many orders would be placed each year?

v) What is the annual ordering cost?

vi) What is the total annual cost to manage the inventory?

vii) How many days on average are there between orders?

viii) What is ROP?

Reference no: EM132200025

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