Reference no: EM132876538

Question - The following relationship for inventory purchases and shortage costs has been established for a Corporation.

1. Order must be placed in multiples of one hundred (100) units.

2. Requirements for the year are 180,000 units (U). (use 50 weeks in a year for calculations )

3. The purchase price per unite (P) is $2.

4. The carrying cost (C) is 50% of the purchase price of the goods.

5. The cost of an order placed (V) is $400.

6. Desire safety stock (S) is 10,000 units (on hand) initially.

7. One week is required for delivery.

Required -

1. What is the most economical order quantity (EOQ)?

2. What is the optimal number of orders to be placed?

3. At what inventory level should a reorder be made?