Acme Industries is currently experiencing problems with its inventory of anvils. Its manager, Willy Coy currently orders the anvils in batches of 10,000. Four orders are placed during the year to meet the estimated sales demand of 40,000 units. Each order costs $20 and each unit costs $2 to carry. Mr. Coy maintains a safety stock of 500 anvils.
Required:
b. What is the Economic Order Quantity for Acme Industries?
c. What is the average inventory if Acme uses the EOQ calculated in part b) and it still maintains its 500 units of safety stock?
d. What is Acme's annual savings in inventory costs by using the EOQ and maintaining its safety stock?
Definitions:
Third-party Beneficiaries
Individuals or entities that, while not directly involved in a contract, stand to benefit from its execution or terms.
Reasonable and Foreseeable
A legal standard applied to determine if a person could predict or anticipate the effects of their actions in a given context.
Injured
Refers to an individual who has suffered harm or damage, which may be physical, emotional, or financial, due to another party's actions or negligence.
Household Members
Individuals who reside in the same dwelling, sharing living accommodations and possibly familial or economic ties.
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