Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Minalass Mfg. is involved in the production of machine parts. The company uses 500,000 pounds of steel annually. The current purchasing cost for steel is P2.20 per pound. The carrying cost for inventory is 20% of the purchase price. The cost of ordering steel is P1,000 per order. The company has decided to maintain a safety stock of 20,000 pounds. Delivery time per order is 10 days. The company works 365 days a year.
Required: (Round up answer)
- Determine the optimal EOQ
- How many orders will placed annually?
- What is the average inventory
- What is the inventory order point? (that is, at what level of inventory should a new order be placed)
- What is the company’s total (relevant) inventory costs for the year?
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