Chapter 12, Problem 10P

a

Summary Introduction

Interpretation: Average inventory level needs to be determined based on the given information

Concept Introduction: Average inventory applies to the stock which must be kept in inventory at all time to meet unexpected demands and back orders.

b

Summary Introduction

Interpretation: The number of orders per year needs to be determined as per the given information.

Concept Introduction: The number of orders per year can be calculated by dividing the total annual demand to the economic order quantity.

c

Summary Introduction

Interpretation: The total annual inventory holding cost needs to be determined as per the given information.

Concept Introduction: The total annual cost of holding relates to the average cost of keeping the inventory.

d

Summary Introduction

Interpretation: The total annual ordering cost needs to be determined as per the given information.

Concept Introduction: The total annual cost of ordering can be calculated by multiplying the cost of ordering by the number of orders per year.

e

Summary Introduction

Interpretation: Total annual costs needs to be determined with the help of given data

Concept Introduction: Total annual costs are the sum of the total annual purchasing costs and total annual keeping costs at the annual demand issued.