Appliance for Less is a local appliance store. It costs this store $22.92 per un
ID: 2771777 • Letter: A
Question
Appliance for Less is a local appliance store. It costs this store $22.92 per unit annually for storage, insurance, etc., to hold microwave in their inventory. Sales this year are anticipated to be 595 units. Each order costs $90. The company is using Economic Order Quantity model in placing the orders.
It takes approximately 5 day(s) to receive an order after it has been placed. If the store insists on a 6 day(s) safety stock (assume 365-days a year), what should the inventory level be when a new order is placed?
(Round the answer to the whole number)
Explanation / Answer
Solution : step -1 Calculate daily sales: Total sales / 365 595/365 1.63 units per day approx Step -2 What should the inventory level be when a new order is placed Daily sales * (Days required in receiving order + days safety stock) 1.63 * ( 5+ 6) 17.93 i.e. 18 units Answer : 18 units
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