(Solved): reliance trends sells 275 units per month of shoes . the unit cost of a shoe is rs3.50 and the cost ...
reliance trends sells 275 units per month of shoes . the unit cost of a shoe is rs3.50 and the cost of placing an order has been estimated to be rs22. Reliance trends uses an inventory carrying charge of 25%per year. determine the optimal order quantity, order frequency, and the annual cost of inventory management. if through automation of the purchasing process,the ordering cost can be cut to rs10, what will be the new economic order quantity, order frequency, and annual inventory management cost? explain these results
To determine the optimal order quantity, order frequency, and the annual cost of inventory management, we can use the Economic Order Quantity (EOQ) formula. The EOQ formula takes into account the demand, ordering cost, and carrying cost to find the most cost-effective order quantity.Given information:Demand (D) = 275 units per monthUnit cost of a shoe (C) = Rs3.50Ordering cost (S) = Rs22Inventory carrying charge (CC) = 25% per yearTo calculate the EOQ, we can use the following formula: First, let's calculate the EOQ using the given values:
(rounded to the nearest whole number)Therefore, the optimal order quantity is approximately 156 units.Next, let's calculate the order frequency using the EOQ:Order Frequency = D / EOQ
Order Frequency = 275 / 156
Order Frequency ? 1.76 (rounded to two decimal places)So, the optimal order frequency is approximately 1.76 orders per month.please refer the next step