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Alexis Company uses 800 units of a product per year on a continuous basis. The product...

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Finance

Alexis Company uses 800 units of a product per year on acontinuous basis. The product has a fixed cost of $50 per order,and its carrying cost is $2 per unit per year. It takes 5 days toreceive a shipment after an order is placed, and the firm wishes tohold 10 days’ usage in inventory as a safety stock. Calculate theEOQ. Determine the average level of inventory. (Note: Use a 365-dayyear to calculate daily usage.) Determine the reorder point.Indicate which of the following variables change if the firm doesnot hold the safety stock: (1) order cost, (2) carrying cost, (3)total inventory cost, (4) reorder point, (5) economic orderquantity. Explain.

Answer & Explanation Solved by verified expert
4.4 Ratings (944 Votes)
Annual demand 800 units Fixed cost 50 per order Carrying cost 2 per unit Shipping time 5 days Economic order quantity Under root of 2 Fixed cost Annual demand Carrying cost per unit    See Answer
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