The production department for a company requires 3,600 Kg of raw material for manufacturing particular item per year. It has been estimated that the cost of placing an order is Rs. 36 and the cost c carrying inventory is 25 per cent of the investment in the inventories. The price is Rs. 10 per kg. Th purchase manager wishes to determine an ordering policy for raw material. Calculate (1) The optimal Ic size (2) The optimal order cycle time (3) The minimum yearly variable inventory cost (4) The minimun yearly total inventory cost.

The production department for a company requires 3,600 Kg of raw material for manufacturing particular item per year. It has been estimated that the cost of placing an order is Rs. 36 and the cost c carrying inventory is 25 per cent of the investment in the inventories. The price is Rs. 10 per kg. Th purchase manager wishes to determine an ordering policy for raw material. Calculate (1) The optimal Ic size (2) The optimal order cycle time (3) The minimum yearly variable inventory cost (4) The minimun yearly total inventory cost.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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