Acme Industries is currently experiencing problems with its inventory of anvils. Its manager, Willy Coy currently orders the anvils in batches of 10,000. Four orders are placed during the year to meet the estimated sales demand of 40,000 units. Each order costs $20 and each unit costs $2 to carry. Mr. Coy maintains a safety stock of 500 anvils.
Required:
b. What is the Economic Order Quantity for Acme Industries?
c. What is the average inventory if Acme uses the EOQ calculated in part b) and it still maintains its 500 units of safety stock?
d. What is Acme's annual savings in inventory costs by using the EOQ and maintaining its safety stock?

Question

Acme Industries is currently experiencing problems with its inventory of anvils. Its manager, Willy Coy currently orders the anvils in batches of 10,000. Four orders are placed during the year to meet the estimated sales demand of 40,000 units. Each order costs $20 and each unit costs $2 to carry. Mr. Coy maintains a safety stock of 500 anvils.
Required:
  b. What is the Economic Order Quantity for Acme Industries?
c. What is the average inventory if Acme uses the EOQ calculated in part b) and it still maintains its 500 units of safety stock?
d. What is Acme's annual savings in inventory costs by using the EOQ and maintaining its safety stock?

Quizplus · Accepted Answer

The Answer of Acme Industries is currently experiencing problems with its inventory of anvils. Its manager, Willy Coy currently orders the anvils in batches of 10,000. Four orders are placed during the year to meet the estimated sales demand of 40,000 units. Each order costs $20 and each unit costs $2 to carry. Mr. Coy maintains a safety stock of 500 anvils.
Required:
  b. What is the Economic Order Quantity for Acme Industries?
c. What is the average inventory if Acme uses the EOQ calculated in part b) and it still maintains its 500 units of safety stock?
d. What is Acme's annual savings in inventory costs by using the EOQ and maintaining its safety stock?

Acme Industries Is Currently Experiencing Problems with Its Inventory of Anvils