Lethabo Mojela is the purchasing agent for central valve company which sells industrial valves and fluid control devices. One of central Valve’s most popular valves is the Western, which has an annual demand of 8000 units. The cost of each valve is R180 and the carrying cost as a percentage of unit cost is 20%. Lethabo has made a study of the costs involved in placing an order for any of the valves that Central stocks and she has concluded that the average ordering cost is R50 per order. Furthermore, it takes about days to arrive from the supplier. The company works 250 days in a year.
Calculate the following (18)
Economic order quantity (3)
Average inventory if the EOQ is used (3)
Optimal number of orders per year based on the EOQ (3)
Optimal number of days between any two orders (3)
Total annual inventory cost ( carrying cost + ordering cost ) (3)
Reorder point (3)