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The Ethel Company purchases (sells) 360,000 boxes of ice cream cones each year. Carrying costs are $2 per box and ordering costs are $ 400 per order. The company desires to maintain a safety stock of 10,000 boxes (on hand initially) and four days are required for delivery. (Use 360 days when computing daily purchase(sale).)

a) What is the economic order quantity?

b) What is the optimal number of order to be placed?

c) What is the total inventory cost associated with the economic order quantity?

d) What is the reorder point?

e) The company can obtain a quantity discount of $0.01 per box if it increases its order size to 18,000 boxes. Should the Ethel Company increase its order size to take the cash discount offered?

Basic Finance, Finance

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