Thomas Kratzer is the purchasing manager for the headquarters of a large insuran

Question

Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,100 units per year. The cost of each unit is $103, and the inventory carrying cost is $9 per unit per year. The average ordering cost is $31 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 122 units. (This is a corporate operaticn, and there are 250 working days per year). a) What is the EOO? 205 units (round your response to two decimal places). b) What is the average inventory f the EOO is used? units round your response to two decimal places

Explanation / Answer

From part a the EOQ value is 205.

The average inventory if EOQ is used is

= EOQ/2

=205/2

=102.5

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