Info

Current Policy

New Policy

Price per unit

$ 750

$ 750

Cost per unit

$ 400

$ 400

Unit sales per month

1,100

1,220

EOQ Clapper Manufacturing uses 2,000 switch assemblies per week and then reorders another 2,000. If the relevant carrying cost per switch assembly is $40, and the fixed order cost is $1,100, is Clapper's inventory policy optimal? Why or why not?

EOQ The Trektronics store begins each week with 170 phasers in stock. This stock is depleted each week and reordered. If the carrying cost per phaser is $45 per year and the fixed order cost is $48, what is the total carrying cost? What is the restocking cost? Should Trektronics increase or decrease its order size? Describe an optimal inventory policy for Trektronics in terms of order size and order frequency.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VII. Short-Term Financial Planning and Management

21. Credit and Inventory Management

© The McGraw-Hill Companies, 2002

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

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