Posted: November 22nd, 2022

We use 1,000 electric drills per year in our production process. The ordering cost for these is $100 per order and the carrying cost is assumed to be 40% of the per-unit cost. Price is established by the following quantity discount schedule. The company works 250 days per year.

Quantity

1 to 119

120 and up

Price

$78 per unit

$50 per unit

The size of the optimal order is:

How many orders do we need to place per year?:

How many days do we have to wait between orders? What is the maximum inventory?:

What is the average inventory?

The Holding Cost for the optimal order is:

The Ordering Cost for the optimal order is:

The Total Cost of Inventory (TCI) is:

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