The IBP Grocery Orders Most of Its Items in Lot

question 73

Essay

The IBP Grocery orders most of its items in lot sizes of 10 units.Average annual demand per side of beef is 720 units per year.Ordering costs are $25 per order with an average purchasing price of $100.Annual inventory carrying costs are estimated to be 40 percent of the unit cost.Required:
a.Determine the economic order quantity.
b.Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity.
c.Since the shelf life is limited the IBP Grocery must keep the inventory moving.Assuming a 360-day year, determine the optimal lot size under each of the following: (1)a 20-day shelf life and (2)a 10-day shelf life.

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Definitions:

Compliance

The act of adhering to laws, regulations, standards, or guidelines set by authorities or organizations.

Justification

The reason or explanation for an action, decision, or belief, demonstrating its appropriateness or validity.

Important Request

A significant or critical appeal or requirement that necessitates prompt attention or action.

Inconvenience

A minor trouble or difficulty that causes discomfort or annoyance but is not a serious problem.