Expert: Dr. Giuseppe Lovecchio, CFPIM, CSCP - 10/14/2009

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.

Hoping answering your questions, best regards

I'm available for on line and on site consultancy and education (webinar, etc)

Feel free to call me.
Giuseppe
www.lovecchioconsulting.it/english