Steve\'s Tire and Lube (inventory policy) A continuous review policy is used for

Question

Steve's Tire and Lube (inventory policy) A continuous review policy is used for all car parts and supplies, but Steve believes this system may require too much time to maintain for all inventory items. Steve has determined that to call to supplier, pay for transportation, and put a shipment away costs approximately $40. The small stock room doesn't require special equipment or personnel.The annual holding costs are 30% of unit cost. Delivery orders take about one week from the local supplier. HOW MUCH IS THE TOTAL ANNUAL COSTS OF ORDERING AND HOLDING INVENTORY USING THE CONTINUOUS REVIEW SYSTEM?

Explanation / Answer

Under the Continuous Review Systems the general cost equation is given as under:

Total cost =      Annual cycle inventory holding cost + Annual ordering cost

                       + Annual safety stock holding cost

Hence, we require the data to calculate the safety stock and reorder point as well to arrive at the total cost.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.