What would be the saving or the loss

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Reference no: EM132826047

Question - Hendriks Games is a gaming company located in Windhoek that manufactures different types of games. They are planning on launching a new game next year for which they plan to use 56 250 units of a special component they buy from a supplier based in Oshakati, XL Electronics. The component will be used at an even rate throughout the year. Hendriks has ascertained that a reorder quantity of 1 125 units would be ideal each time they buy this component in the year.

It is expected that the costs related to this component will be as follows:

-Holdings costs N$5 per unit per year

-Purchase price N$35 per unit

-Ordering costs N$100 per order.Hendriks is aware that failure to manage inventory costs will have an implication on the profitability of this new product he is planning to launch. He has come to you to assist him in making correct decisions about managing inventory costs.

If Hendriks change from his planned reorder quantity of 1 125 units to EOQ, what would be the saving or the loss?

Reference no: EM132826047

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