Economic ordering quantity, reorder point, and safety stock Chen Enterprises wishes to determine the economic...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Economic ordering quantity, reorder point, and safety stock
Chen Enterprises wishes to determine the economic order quantity for a critical and expensive inventory item that it uses in large amounts at a relatively constant rate throughout the year. The firm uses 450,000 units of the item annually and has order costs of $375 per order; its carrying costs associated with this item are $28 per unit per year. The firm plans to hold safety stock of the item equal to five days of usage, and it estimates that 12 days are needed to receive an order for the item once placed. Assume a 365-day year.
(a)Calculate the firms EOQ for the item of inventory described.
(b)What is the firms total cost based upon the EOQ calculated in part (a)?
(c)How many units of safety stock should Chen hold?
(d)What is the firms reorder point for the item of inventory being evaluated?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.