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Unformatted text preview: st of each of the strategies described in part b.
d. Discuss the profitability–risk tradeoffs associated with the aggressive strategy
and those associated with the conservative strategy.
LG3 14–5 EOQ analysis Tiger Corporation purchases 1,200,000 units per year of one
component. The fixed cost per order is $25. The annual carrying cost of the item
is 27% of its $2 cost.
a. Determine the EOQ under the following conditions: (1) no changes, (2) order
cost of zero, and (3) carrying cost of zero.
b. What do your answers illustrate about the EOQ model? Explain. LG3 14–6 EOQ, reorder point, and safety stock Alexis Company uses 800 units of a
product per year on a continuous basis. The product has a fixed cost of $50 per
order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a
shipment after an order is placed, and the firm wishes to hold 10 days’ usage in
inventory as a safety stock.
a. Calculate the EOQ.
b. Determine the average level of inventory. (Note: Use a 360-day year to calculate daily usage.)
c. Determine the reorder point.
d. Indicate which of the following variables change if the firm...
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