Formula for current total annual inventory cost.
Asked Nov 12, 2009, 10:16 AM
Novelty Gifts, Inc. is experiencing some inventory control problems. The manager, Wanda LaRue, currently orders 5,000 units four times each year to handle annual demand of 20,000 units. Each order costs $15 and each unit costs $1.50 to carry. Ms. LaRue maintains a safety stock of 200 units.
a) What is Novelty Gifts' current total annual inventory cost?
b) Calculate the economic ordering quantity (EOQ).
c) What is average inventory under EOQ if Ms. LaRue maintains a safety stock of 200 units.
d) Calculate total annual inventory cost under EOQ.
Now I have figured out B and C, but I am a little confused about A and D, I need to know the formula to use for A that would be before using the EOQ. I am just drawing a blank. I know for D that I come up with 954 by using the units and orders. Is that right. But really need the formula for A. I can't remember or my brain is drawing a blank for this one. Please help me.