Essay
Beta Industries is currently experiencing problems with its inventory of hammer heads.Its manager, Laura Engles currently orders the hammer heads in batches of 6,000.Six orders are placed during the year to meet the estimated sales demand of 36,000 units.Each order costs $75 and each unit costs $0.50 to carry.Ms.Engles maintains a safety stock of 1,000 hammer heads.Required:
a.What are Beta's total annual costs (TC)of inventory under its current ordering policy?
b.What is the Economic Order Quantity for Beta Industries?
c.What is the average inventory if Beta uses the EOQ calculated in part b)and it still maintains its 1,000 units of safety stock?
d.What is Beta's annual savings in inventory costs by using the EOQ and maintaining its safety stock?
Correct Answer:
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b.EOQ = = 3,286.34 round up ...View Answer
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Correct Answer:
Verified
b.EOQ = = 3,286.34 round up ...View Answer
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Get Access to more Verified Answers free of charge
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