Unformatted text preview: TC 100,000 = $2504084 So ordering 10,000 units minimizes cost and is therefore more preferable than ordering 100,000 units. (f) Total annual inventory costs = $2348840 (g) Inventory turn = 24. This is lower than the inventory turn when ordering from Accurate Gears because there is a trade off between the savings from Precise Gears’ quantity discount offer with the higher cost of storing the inventory for longer. 5. Annual demand = 6000 boxes of truffles per year When shipping costs are $15 and cost per truffle box is $12, the EOQ = 300. The corresponding TC = $72,600 When shipping costs are $20 and the cost per truffle box is $11, the EOQ = 346 The corresponding TC = $66,693 When shipping costs are $25 and the cost per truffle box is $10, the EOQ = 387 The corresponding TC = $60,850 Therefore, the optimal order quantity is 600 truffle boxes per order, which gives an annual cost of $60,850....
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- Summer '07
- Management, $10, Chris Martin, Total annual inventory, Precise Gears