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-BARSIC- [3]
3 years ago
9

Aberwald Corporation expects to sell 90,000 bags of lawn fertilizer annually. The optimal safety stock (which is on hand initial

ly) is 1,000 bags. Each bag costs the firm $1.50, inventory carrying cost is 20%, and the cost of placing an order with its supplier is $15.
(a) What is the Economic Ordering Quantity?
(b) What is the maximum inventory of fertilizer?
(c) What will be the firm%u2019s average inventory?
(d) How often must the company order?
Business
1 answer:
UNO [17]3 years ago
4 0

Answer:

Annual demand (U) = 90.000 bags

Cost of each bag = $1.50

Inventory carrying cost per unit(C) = $1.50 × 20% = 0 30

Ordering cost per unit (O) = $15

Part A)

EOQ = \sqrt{\frac{2UO}{C}}

EOQ = \sqrt{\frac{2 * 90000 * 15}{0.30}}

EOQ = \sqrt{9000000}

EOQ = 3,000

Part B)

Maximum inventory = EOQ + Safety inventory on hand  

Maximum inventory = 3000 + 1000

Maximum inventory = 4.000

Part C)

Average inventory = Maximum inventory + Minimum or Safety /2

Average inventory = 4,000 + 1,000 / 2

Average inventory =2,500

Part D)

How often company order = Annual demand / EOQ

How often company order = 90,000 / 3.000

How often company order = 30

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Answer:

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Explanation:

Giving the following information:

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Year 1= 4,200/1.15 - 6,900= -3,247.83

Year 2= 5,100/1.15^2 - 3,247.83= 608.50

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