Question

You are the purchasing manager and you buy a raw material having the following information: Annual demand = 900 units Fixed order quantity = 260 units Order cost = $100 / order Inventory carrying cost = 25% Per unit purchase cost = $10 / unit Safety stock = 30 On average, what is the dollar value of inventory that you will have for this material?

Answer 1

Answer:

=2983.25

Explanation:

In calculating the inventory on raw materials you will have to Add together the original value of raw materials, the works in progress if any and finished goods to get starting total inventory.

The solution to the question can be calculated like this:

EOQ=$\sqrt{2* 900 * 100/2.5}$

EOQ=268.328

EOQ+SAFETY STOCK=268.328+30

=298.325

VALUE=298.325*10

=2983.25