Nico's Manufacturing Uses 2,400 Units of a Product Per Year

Essay

Nico's Manufacturing uses 2,400 units of a product per year on a continuous basis. The product carrying costs are $60 per year and ordering costs are $250 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory.
(a) Calculate the economic order quantity (round up to the nearest whole unit.
(b) Calculate the total cost per year to order and carry this item.
(c) Their supplier has notified the company that if they increase their order quantity by 58 units they will give the company a discount. Calculate the dollar discount that the company will have to give Nico's Manufacturing to result in a net benefit to the company.