Question #207644

A trading company buys and sells 10000 bottles of pain-balm every year. The company's cost of placing an order of pain-balm is $100. The holding cost per bottle on inventory is $0.30.

To determine the optimum order quantity and inventory cycle time for the pain-balm bottles.

How many orders should be placed each year?



1
Expert's answer
2021-06-17T19:09:25-0400

Ans:-

1)

The optimum order quantity kk is the ratio between the cost of placing an order mm and the holding cost p,p,

k=mp=1000.3=333k=\frac mp=\frac{100}{0.3}=333 bottles;


inventory cycle time tt is the ratio between the optimum order quantity kk and the quantity of the bottles n,n,


t=kn=33310000=130t=\frac kn=\frac{333}{10000}=\frac{1}{30} year (or 1212 days).


2) Number of orders ss is the inverse of the inventory cycle time t,t,


s=1t=30s=\frac 1t=30 orders per year.


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