Chapter2 1. (20 0 minutes) Novelty Gifts, Inc is experiencing some inventory con

Question

Chapter2 1. (20 0 minutes) Novelty Gifts, Inc is experiencing some inventory control problems. The manager, Wanda LaRue, currently orders 5,000 units four times each year to handle annual demand of 20,000 units. Each order costs $15 and each unit costs $1.50 to carry. Ms. LaRue maintains a safety stock of 200 units. What is Novelty Gifts' The total inventory costs are given by current total annual inventory cost? TC +CQ+ Safety Stock x C Where, S Total sales in units O Ordering cost for each order C Carrying cost per unit in dollars Q?Quantity per order

Explanation / Answer

TC = SO/Q + CQ /2 + Safety stock x C

S = 20000 Units

O = $15

C = $1.5

Q = 5000 Units

Safety stock = 200 Units

TC = 20000 x 15 /5000 + 1.5 x 5000/2 + 200 x 1.5

TC or Total inventory cost = $4,110

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