The Arenas Company estimates its carrying cost at 15% and it’s ordering cost

at $9 per order. The estimated annual requirement is 48,000 units at a price of

$4 per unit.

1. What is the most economical number of units to order?

2. How many orders should be placed in a year?
3. How often should an order be placed?

To date, Raymond Bro. has been purchasing an item in lots of 900 units. This
equates to a three-month supply. The cost per unit is $12, the order cost is
$16 per order, and the carrying cost is 25%.

How much can Raymond Bro. save per year by purchasing the item in the
most economical quantities?
The following information is available for Parokya Corporation’s Material V:

Annual usage12,600 units

Working days per year 360 days

Normal lead time 20 days

The units of Material X are required evenly throughout the year.

a. What is the reorder point?

b. Assuming that occasionally, the company experiences delay in the delivery of Material X, such
that the lead time reaches a maximum of 30days, how many units of safety stock should the
company maintain and what is the reorder point?

Using EOQ Model, Ram Corporation determined the economic order quantity for a merchandise
item to be 800 units. To avoid stock out costs, it maintains 200 units in safety stock. What is Ram
Corporation's average inventory of such merchandise item?