Outdoor Living Manufacturers uses 1,000 units of a product per year. Its fixed cost is $28 per order, while the carrying cost is $5 per unit per year. The lead time is 5 days and, therefore, the firm keeps 7 days' usage in inventory as safety stock. (Note: Use a 365-day year where required.) a. Calculate the EOQ and the average inventory. b. How many orders will Outdoor Living Manufacturers place during 1 year? c. When should Outdoor Living Manufacturers place its orders?

Outdoor Living Manufacturers uses 1,000 units of a product per year. Its fixed cost is $28 per order, while the carrying cost is $5 per unit per year. The lead time is 5 days and, therefore, the firm keeps 7 days' usage in inventory as safety stock. (Note: Use a 365-day year where required.) a. Calculate the EOQ and the average inventory. b. How many orders will Outdoor Living Manufacturers place during 1 year? c. When should Outdoor Living Manufacturers place its orders?

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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Exercises
Outdoor Living Manufacturers uses 1,000 units of a product per year. Its
fixed cost is $28 per order, while the carrying cost is $5 per unit per year.
The lead time is 5 days and, therefore, the firm keeps 7 days' usage in
inventory as safety stock.
(Note: Use a 365-day year where required.)
a. Calculate the EOQ and the average inventory.
b. How many orders will Outdoor Living Manufacturers place during 1
year?
c. When should Outdoor Living Manufacturers place its orders?
<date/time>
15

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