Purchase Solution

minimize the annual inventory costs

Not what you're looking for?

Ask Custom Question

Northern Distributors is a wholesale organization that supplies retail stores with lawn care and household products. One building is used to store Neverfail lawn mowers. The building is 25 feet wide by 40 feet deep by 8 feet high. Anna Oldham, manager of hte warehouse, estimates that about 60% of the warehouse can be used to store the Neverfail lawn mowers and a small office. Each Neverfail lawn mower comes in a box that is 5 feet by 4 feet by 2 feet high. The annual demand for these lawn mowers is 12,0000, and the ordering cost for Northern Distributors is thinking about increasing the size of the warehouse. The comapny can only do this by making the warehouse deeper. At the present time, the warehouse is 40 feet deep. How many feet of depth should be added on the warehouse to minimize the annual inventory costs? How much should the company be willing to pay for this addition? Remember that only 60% of the total area can be used to store Neverfail lawn mowers. Assum all EOQ conditions are met.

Purchase this Solution
Solution Summary

Help is given to minimize the annual inventory costs.

Solution Preview

Dear Student,

Thank you for using BM.
Below are my answers.

ANSWERS

EOQ = square root [(2 x demand x ordering cost)/annual carrying cost]
Demand = 12,000
Order cost = $10 => assumed figure since no information was given
Annual carrying cost per unit = $5 => assumed figure since no information was given

For the assumed figures, just replace them o get the answer

EOQ = square root [(2 x 12,000 x $10)/$5] = 219 units per ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

View More Free Quizzes
Related BrainMass Solutions

  • Inventory Control Models

    Demand is constant, how much product should be ordered at a time to minimize the inventory costs How many orders per year should be placed and what would the annual ordering cost be What would the average inventory be and what would annual holding

  • Inventory Management and Demand

    518085 Inventory Management and Demand Company A's demand is uniform throughout the year and totals 18,000 units per year. Ordering costs total $38 per order. The annual holding cost rate is 26% of the value of the inventory.

  • Determining the optimal inventory parameters

    What would the annual holding cost be? (a) How many number 6 screws should Lila order at a time if she wishes to minimize total inventory cost?

  • Calculating EOQ and inventory costs

    What is the economic order quantity (EOQ) that will minimize inventory costs? 2. What is the average number of units in inventory based upon ordering using the EOQ? 3.

  • Economic Order Quantity: Minimizing Ordering and Inventory Costs

    474888 Economic Order Quantity: Minimizing Ordering and Inventory Costs As the production manager, you need to minimize both ordering and inventory costs.

  • economic order quantity & production lot model

    The production setup costs total $79 per setup. The annual holding cost rate is 29% of the value of the inventory. The per-unit cost of finished product is $20. The production rate is constant and equivalent to 65,000 units per year.

  • Definitions of various aspects of an inventory model

    EOQ: The quantity of material per order for which the annual carrying cost curve and annual ordering cost curve meets together to minimize the total annual stocking cost is called as economic order quantity (EOQ).

  • Economic order quantity and annual costs

    Each order placed costs $10; the annual cost to carry items in inventory is $2 each. Demand for an item is 1,000 units per year. Each order placed costs $10; the annual cost to carry items in inventory is $2 each. a.

  • Inventory problem:

    Usage rate is 25 stones per day and ordering costs are $48 A) If carrying costs are $2 per year for each stone, find order quantity that will minimize total annual cost B) If annual carrying costs are 30 percent of unit cost, what is the optimal

  • Managerial Accounting : Working Capital and Short-Term Financing

    When financial managers take action to minimize the carrying costs of current assets, they: B) also consider spoilage costs. *** 7. Which of the following would act to reduce the carrying costs of inventory?

View More Related Solutions