# Inventory Cost Problem

• Nov 29th 2012, 06:09 PM
Shifletz
Inventory Cost Problem
I'm having issues finding the answer to anything relating to the \$55 unit cost. Here is the full problem, including the answers that I've been able to find thus far:

 Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information: Average demand = 24 units per day Average lead time = 30 days Item unit cost = \$55 for orders of less than 220 units Item unit cost = \$53 for orders of 220 units or more Ordering cost = \$27 Inventory carrying cost = 20% The business year is 260 days. Assume there is no uncertainty at all about the demand or the lead time

 (1) Calculate EOQ if unit cost is \$55 and \$53. (Round up your answer to the next whole number.)

Unit cost at \$55 = 175 units
Unit cost at \$53 = 178 units

 (2) Calculate annual ordering costs for each alternative? (Round your answers to 2 decimal places.Omit the "\$" sign in your response.)

Unit cost at \$55 = \$
Unit cost at \$53 = \$ 765.82

 (3) Calculate annual inventory carrying costs for each alternative? (Round your answers to 2 decimal places. Omit the "\$" sign in your response.)

Unit cost at \$55 = \$
Unit cost at \$53 = \$ 1,166

 (4) Calculate annual product costs for each alternative? (Omit the "\$" sign in your response.)

Unit cost at \$55 = \$ 343,200
Unit cost at \$53 = \$ 330,720

 (5) What will be the total costs for each alternative? (Round your answers to 2 decimal places. Omit the "\$" sign in your response.)

Unit cost at \$55 = \$
Unit cost at \$53 = \$ 332,651.82

(6) How many chairs should the firm order each time?

Order quantity = 220 chairs

 (7) How much the firm can save by placing the order? (Round your answers to 2 decimal places. Omit the "\$" sign in your response.)

Save = \$