LOG203 Singapur University Inventory Management Inventory Calculations

Question 2

A grocery store has a monthly demand of 750 chocolate bars. It buys the bars from the

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distributor at price of $60 per bar. It calculated that keeping a bar in stock, costs around 67

cents per month. Each time it places an order to the distributor, there is a processing fee of

$160. The distributor offered the store a discounted price of $56 per chocolate bar if it orders

300 bars each time. Solve to determine whether the store should take the offer.

In your answer, compare the two scenarios in tabular form and include the following:

(i) Lot size

(ii) Average inventory

(iii) Number of orders per year

(iv) Purchase cost

(v) Carrying cost

(vi) Ordering cost

(vii) Total Cost

(viii) Savings

– I need full formulas and workings and probably explanations

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