Gosford Fruit & Vegetables Orders Most of Its Items in Lot

Essay

Gosford Fruit & Vegetables orders most of its items in lot sizes of 15 units.Average annual demand per kilo of kumara is 900 units per year.Ordering costs are $34.15 per order with an average purchasing price of $150.Annual inventory carrying costs are estimated to be 40% of the unit cost.
Required:
a.Determine the economic order quantity (EOQ).
b.Determine the annual cost savings if the shop changes from an order size of 15 units to the economic order quantity (EOQ).
c.Since the shelf life is limited,the Gosford Fruit & Vegetables must keep the inventory moving.Assuming a 360-day year,determine the optimal lot size under each of the following: (1)a 20-day shelf life and (2)a 10-day shelf life.
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