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You are the purchasing manager and you buy a raw material having the following information: Annual...

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?

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Answer #1

EOQ=

EOQ=268.328

EOQ+SAFETY STOCK=268.328+30

=298.325

VALUE=298.325*10

=2983.25

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