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TWM Company purchases 8000 units of product each year at a unit cost of $10. The order cost is $30.00 per order, and the holding cost per unit per...

TWM Company purchases 8000 units of product each year at a unit cost of $10.00. The order cost is $30.00 per order, and the holding cost per unit per year is $3.00.

a) What are the economic order quantity, the total annual cost, the number of orders to place in one year, and the reorder point when the lead time is two weeks?

b) What happens to the EOQ if backordering is possible and the stockout cost per unit per year is $1.00?

c) The supplier is offering a special discount and has temporarily reduced his unit price from $10.00 to $9.00. What amount should be purchased to take advantage of the discount?

d) The supplier will increase his unit price from $10.00 to $11.00 on 1 January. What amount should be purchased and delivered on 31 December before the price increase is effective if the stock position is 346 units? What will be the cost saving of the special purchase

Top Answer

Hi! Parts (c) and (d) of this question are a bit ambiguous. While there is a general explanation for how... View the full answer

TWM Inventory Policy.docx

TWM COMPANY INVENTORY POLICY
Question:
TWM Company purchases 8000 units of product each year at a unit cost of $10.00.
The order cost is $30.00 per order, and the holding cost per unit per year is...

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