inventory_practice problems _ solutions.docx - 1[EOQ model...

This preview shows page 1 - 2 out of 3 pages.

1. [EOQ model]At the Lawn King (LK) Company, a manufacturer of lawnmowers, the managers are attempting to make decisions concerning production and inventory control. Their policies must take into account the fact that they want to keep finished goods inventory low, since they have little confidence in their forecasts for particular model sales. One of the raw materials that LK buys are the motors they purchase and install on the lawnmowers. Assume the cost of purchasing each motor is $40. Each time they place an order, their cost is $20 for processing the order. Assume also their cost of capital was 10%, and demand for these motors was 1000 for the year. Calculate the optimal order quantity for this motor. At this EOQ level, what is the average annual carrying cost? At this EOQ level, what is the average annual ordering cost?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture