Aberwald Corporation Expects to Order 126,000 Memory Chips for Inventory

question 15

Multiple Choice

Aberwald Corporation expects to order 126,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate. Fixed ordering costs are $200 per order; the purchase price per chip is $25; and the firm's inventory carrying costs is equal to 20 percent of the purchase price. (Assume a 360-day year.)
-If the lead time for placing an order is 5 days, and Aberwald holds a safety stock equal to a 30-day supply of chips, then at what inventory level should an order be placed?

• A) 15,570
• B) 3,175
• C) 12,250
• D) 13,675
• E) 8,124

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Definitions:

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