QUESTION 1 Lyla has determined that the annual demand for number 7 screws is 100,000 screws. Lyla who works with her brother's hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, an so on. Furthermore, she estimates that the cost of carrying of one screw in inventory for a year is one half of 1 cent. Assume that the demand is constant throughout the year. It takes approximately 8 working days for an order of number 7 screws to arrive once the order has been placed. The demand for number 7 screws is constant, and on the average, Lyla has observed that her brother's hardware store sells 500 of these screws each day. Because the demand is constant, Lyla believes that she can avoid stockouts completely if she only orders the number 7 screws at the correct time. Determine: a. How many number of 7 screws should Lyla order at a time if she wishes to minimize inventory cost? b. How many orders per year would be placed? What would the annual ordering cost be? c. What would the average inventory be? What would the annual holding cost be?

QUESTION 1 Lyla has determined that the annual demand for number 7 screws is 100,000 screws. Lyla who works with her brother's hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, an so on. Furthermore, she estimates that the cost of carrying of one screw in inventory for a year is one half of 1 cent. Assume that the demand is constant throughout the year. It takes approximately 8 working days for an order of number 7 screws to arrive once the order has been placed. The demand for number 7 screws is constant, and on the average, Lyla has observed that her brother's hardware store sells 500 of these screws each day. Because the demand is constant, Lyla believes that she can avoid stockouts completely if she only orders the number 7 screws at the correct time. Determine: a. How many number of 7 screws should Lyla order at a time if she wishes to minimize inventory cost? b. How many orders per year would be placed? What would the annual ordering cost be? c. What would the average inventory be? What would the annual holding cost be?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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