A moped manufacturing company needs 100,000 units of moped tires for its production per year.The carrying costs of these tires are 10 per unit per year. Fixed ordering cost is 400. What is the optimal number of units should the company order each time in order to minimize total inventory cost? At this optimal quantity, how often should the company order its moped tires? Assume a 365-day year.

A moped manufacturing company needs 100,000 units of moped tires for its production per year.The carrying costs of these tires are 10 per unit per year. Fixed ordering cost is 400. What is the optimal number of units should the company order each time in order to minimize total inventory cost? At this optimal quantity, how often should the company order its moped tires? Assume a 365-day year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A moped manufacturing company needs 100,000 units of moped tires for its production per
year. The carrying costs of these tires are 10 per unit per year. Fixed ordering cost is 400.
What is the optimal number of units should the company order each time in order to minimize total
inventory cost? At this optimal quantity, how often should the company order its moped tires?
Assume a 365-day year.

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