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Q: A manufacturing organisation uses 5,000kg of a raw material evenly over a period.The purchase price is $6.50 per kg and the holding cost per period is 10% of purchase price.If the order quantity is 500 kg and a buffer inventory of 100 kg is held,the total holding cost of the raw material in the period is:
A)$195
B)$227.50
C)$325
D)$3,250
According to kaplan the right answer is B but how and why ?If reorder quantity is 500, the average inventory will be:
500/2 + 100 (buffer stock) = 350
It is assumed that the 500 is used up evenly and that the 100 is always there. (Stock usage is irrelevant to holding costs).
350 x 6.50 x 10% = 227.5
@Gromit said:
If reorder quantity is 500, the average inventory will be:500/2 + 100 (buffer stock) = 350
It is assumed that the 500 is used up evenly and that the 100 is always there. (Stock usage is irrelevant to holding costs).
350 x 6.50 x 10% = 227.5
All clear thanks for the help Sir! 🙂
dear sir my question is:
a retailer has a steady demand for rugby balls at 50 a month.each ball cost $6 from the supplier.the cost involved in placing an order $10 and the stockholding cost are 20% of the stock holding value per annum. how many orders will b placed per anum?
a. 1.73
b. 6
c. 8.48
d. 100what is the stockholding cost in this question and EOQ module will b use in his question?
dear sir i have another question:
a business uses 69000 units of an item every year and works for 52 weeks per year.there is a delay of three weeks between placing and recieving an order.
what should be the reorder level to ensure that inventory arrives just as it is needed?answer is 3750 but how?plz explain it
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