Hammonds Corporation is trying to decide between two alternate order plans for its inventory of a certain item. Irrespective of the plan to be followed, demand for the item is expected to be 1,000 units annually. Under Plan A: order costs would be $ 40 per order and inventory holding costs (carrying cost) would be $100 per unit per annum. Under Plan B order costs would be $30 per order, while holding costs would be 20% of unit cost which is $480. Determine: i. the economic order quantity for EACH plan ii. total inventory cost for EACH plan iii. hence, indicate which plan would be better for the company
Hammonds Corporation is trying to decide between two alternate order plans for its inventory of a certain item. Irrespective of the plan to be followed, demand for the item is expected to be 1,000 units annually. Under Plan A: order costs would be $ 40 per order and inventory holding costs (carrying cost) would be $100 per unit per annum. Under Plan B order costs would be $30 per order, while holding costs would be 20% of unit cost which is $480. Determine: i. the economic order quantity for EACH plan ii. total inventory cost for EACH plan iii. hence, indicate which plan would be better for the company
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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Hammonds Corporation is trying to decide between two alternate order plans for its
inventory of a certain item. Irrespective of the plan to be followed, demand for the item is
expected to be 1,000 units annually. Under Plan A: order costs would be $ 40 per order
and inventory holding costs (carrying cost) would be $100 per unit per annum. Under Plan
B order costs would be $30 per order, while holding costs would be 20% of unit cost which
is $480.
Determine:
i. the economic order quantity for EACH plan
ii. total inventory cost for EACH plan
iii. hence, indicate which plan would be better for the company
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