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F. Naz, Chartered Accountant
Category: Homework
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# satou saitou is the purchasing agent for west valve company

### Resolved Question:

satou saitou is the purchasing agent for west valve company . west valve sells industrial valves and fluid control devices . one of the most popular valves is the westren which has an annual demand of 4000 units the cost of each valve is \$90 and the inventory carrying cost is estimated to be 10% of the cost of each valve. satou has made a study of the costs involved in placing an order for any of the valves that west valve stocks ,and she has concluded that the average ordering cost is \$25 per order . furthermore , it takes about two weeks for an order to arrive from the supplier and durring this time the demand per week for west valves is approximately 80.
(a)What is the EOQ?
(b)What is the ROP?
(c)What is the average inventory ?What is the annual holding cost?
(b)How many orders per year would be placed ?What is the annual ordering cost?
Submitted: 5 years ago.
Category: Homework
Expert:  F. Naz replied 5 years ago.

(a)What is the EOQ?

(2*4000*25/9)^0.5 = 149 units
(b)What is the ROP?

2*80 = 160
(c)What is the average inventory ?

149/2 = 74.5 or 75 units

What is the annual holding cost?

75*9 = \$675
(b)How many orders per year would be placed ?

4000/149 = 26.86 or 27 orders

What is the annual ordering cost?

27*25 = 675

Expert:  F. Naz replied 5 years ago.

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Customer: replied 5 years ago.