Hayes Electronic stocks and sells a particular brand of the personal computer. It costs the firm...
Question:
Hayes Electronic stocks and sells a particular brand of the personal computer. It costs the firm $450 each time it places an order with the manufacturer for the personal computers. The cost of carrying one PC in inventory for a year is $170. The store manager estimates that the total annual demand for the computers will be 1,200 units, with a constant demand rate throughout the year. Orders are received within minutes after placement from a local warehouse maintained by the manufacturer. The store policy is never to have stockouts of the PCs. The store is open for business every day of the year except Christmas Day. Determine the following.
a. The optimal order quantity per order.
b. The minimum total annual inventory costs.
c. The optimal number of orders per year.
d. The optimal time between orders in working days.
Inventory Management
Inventory is probably the most important asset for a retailer, and therefore various techniques are used to ensure a consistent supply of inventory while at the meantime minimizing inventory holding and ordering costs.
Answer and Explanation: 1
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a.
Economic Order Quantity (EOQ):
{eq}EOQ=\sqrt{\frac{2* Demand*Order\ Cost}{Holding\ cost}} {/eq}
{eq}=\sqrt{\frac{2*1,200*450}{170}} {/eq}
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Inventory Management Techniques
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Chapter 19 / Lesson 8
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The amount of product that a company must keep in storage will depend on the inventory management process. Learn about inventory management techniques and discuss three major approaches: the ABC approach, the economic order quantity model, and derived-demand inventory.
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