The IBP Grocery Orders Most of Its Items in Lot

question 44

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% 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:

Meeting

A gathering of two or more people for the purpose of discussing and/or acting upon matters of common interest.

Incorporators

Individuals involved in the formation of a corporation who sign its articles of incorporation and may become initial shareholders.

Corporate Articles

Legal documents filed with a state government to officially form a corporation, outlining its structure and purpose.

Appoint

To assign a job or role to someone.