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Appliance for Less is a local appliance store. It costs this store $23.44 per unit annually...

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Appliance for Less is a local appliance store. It costs thisstore $23.44 per unit annually for storage, insurance, etc., tohold microwave in their inventory. Sales this year are anticipatedto be 266 units. Each order costs $68. The company is usingEconomic Order Quantity model in placing the orders.

It takes approximately 2 day(s) to receive an order after it hasbeen placed. If the store insists on a 6 day(s) safety stock(assume 365-days a year), what should the inventory level be when anew order is placed?

(Round the answer to the whole number)

Answer & Explanation Solved by verified expert
4.4 Ratings (848 Votes)

Annual demand = 266

Ordering cost per order = 68

Carrying cost per unit = 23.44

EOQ   = (2×266×68/23.44)^1/2

         = 39 units                             

Safety stock = (Annual demand / 365 days) × Safety days = (266/365) × 6 = 4

Inventory level at the time of a new order is placed = Average units × Lead time + Safety stock

                                                                             = (266/365) × 2 + 4

                                                                             = 6 units
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Appliance for Less is a local appliance store. It costs thisstore $23.44 per unit annually for storage, insurance, etc., tohold microwave in their inventory. Sales this year are anticipatedto be 266 units. Each order costs $68. The company is usingEconomic Order Quantity model in placing the orders.It takes approximately 2 day(s) to receive an order after it hasbeen placed. If the store insists on a 6 day(s) safety stock(assume 365-days a year), what should the inventory level be when anew order is placed?(Round the answer to the whole number)

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