Economics Chapter 28 Homework Reorder Point Safety Stock Weeks Deliver Weekly

Document Type
Homework Help
Book Title
Financial Management: Theory & Practice 14th Edition
Authors
Eugene F. Brigham, Michael C. Ehrhardt
Solution 12/8/12
Chapter: 28
Problem: 3
INPUT DATA:
Fixed order cost (F) $24
Annual unit sales (S) 338,000
Important note: Make your formulas refer to the cells in the input data section.
a. What is the EOQ?
EOQ = 5,200
b. How many orders should the firm place each year?
Optimal number of orders = 65
Total
The following inventory data have been established for the Alder Corporation:
(1) Orders must be placed in multiples of 100 units.
(2) Annual sales are 338,000 units.
Note: The red arrows in the upper right hand of a cell indicates a helpful comment. Click on the cell to see the comment.
c. At what inventory level should a reorder take place? [Hint: Reorder point = Safety Stock + (Weeks to deliver x Weekly usage)
- Goods in transit.
d. (4) The EOQ number of units.
d. Calculate the total costs of ordering and carrying inventories if the order quantity is:
d. (1) 4,000 units.
d. (2) 4,800 units.
d. (3) 6,000 units.
CP
FS2
EOQ =
e. (3) Purchase price increases to $4? Leave sales and fixed costs at original values.
e. (1) Sales increase to 500,000 units?
e. (2) Fixed order costs increase to $30 while sales remain at 338,000 units.
e. What are the EOQ and total inventory costs if

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