Question If we have projected sales of 72,000 units with an ordering cost of $6 per order and a carrying cost of $2.40, what will the average inventory be. i am confused and need your help as i am attempting to implement a similar stratgey fro our Company.
Answer take into account the formula:
(Q/2) * i * c = (A/Q) *S
where=
Q= lot size
i= inventory carrying cost = $2.40
c = unit cost
A= annual demand = 72000 units
S= ordering cost = $6
If you knoe the unit cost you can calculate the average inventory, that is equal to (Q/2), assuming that the demand is linear.
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