HighLife Corporation has the following information: Average demand = 30 units per day
Average lead time = 40 days
Item unit cost = $45 for orders of less than 400 units
Item unit cost = $40 for orders of 400 units or more
Ordering cost = $50
Inventory carrying cost = 15 percent
The business year is 300 days.Standard deviation of demand during lead time = 90
Desired service level = 95 percent
What is the TAC at $40/unit closest to?
A)$351,750
B)$362,325
C)$355,840
D)$362,240

Question

Quizplus · Accepted Answer

EOQ = However, it is necessary to order 400 units to obtain the $40 price. Therefore the TAC of ordering 400 units is:Inventory carrying cost = 400/2($40)(.15) = $1,200Ordering cost = (300)(30)/400 × $50 = $1,125Product cost = 9,000($40) = $360,000TAC = $1,200 + $1,125 + $360,000 = $362,325

HighLife Corporation Has the Following Information: Average Demand = 30