1. Calculate the total annual carrying cost 2. Determine the order-size decision Green Lantern should make if the Luanshya distributor offers a 5 % discount off the purchase cost excluding the delivery price for minimum orders of 1 824 beers. 3. Assuming sales are uniform throughout the year (365 days) and the lead time is 9 days; determine the reorder point at the EOQ level.
Green Lantern, a pub & grill estimates that it will sell 10 000 beers per year which it will purchase from a distributor in Luanshya. A beer costs K18.00 to purchase and K2.00 in freight charges each. The company borrows funds at 9 % interest rate to finance inventories. Green Lantern’s purchasing agent has calculated that it costs K50.00 to place an order for beers and that the handling is K3.00 for each beer.
1. Calculate the total annual carrying cost
2. Determine the order-size decision Green Lantern should make if the Luanshya distributor offers a 5 % discount off the purchase cost excluding the delivery price for minimum orders of 1 824 beers.
3. Assuming sales are uniform throughout the year (365 days) and the lead time is 9 days; determine the reorder point at the EOQ level.
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