Cash Discounts Fogle Manufacturing uses 2,590 switch assemblies per week and then reorders another 2,590. If...
Cash Discounts
Fogle Manufacturing uses 2,590 switch assemblies per week and then
reorders
another 2,590. If the relevant carrying cost per switch assembly is
$5.75 and the fixed
order cost is $740, is the company's inventory policy optimal? Why
or why not?
Do not round intermediate calculations and shows all the formula and step.
Homework Answers
D = 2,590 per week = 2,590 x 52 weeks = 134,680
S = 740
H = 5.75
Hence, EOQ = (2 x 134,680 x 740 / 5.75)1/2 = 5,888 units
Hence, clearly:
- The current inventory policy is not optimal
- The firm is ordering quantities lower than the economic order quantity
- The firm is incurring higher inventory cost in the process
- It should order 5,888 units at a time
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