Koshi Chemical Fertilizer Centre (KCFC) sells 3,380,000 bags of lawn fertilizer annually. The fixed costs of placing and receiving are Rs 480 per…
BBA Financial Management · 2024 · Solved Question with Answer
Koshi Chemical Fertilizer Centre (KCFC) sells 3,380,000 bags of lawn fertilizer annually. The fixed costs of placing and receiving are Rs 480 per order. The cost price of fertilizer is Rs 600 per bag. The annual cost of carrying this inventory item is 20 percent of the cost price. KCFC maintains 15,000 bags of fertilizer as safety stocks. The fertilizer supplier requires 2 weeks of lead time from order to delivery of the fertilizer.
a. What is the economic order quantity of fertilizer for KCFC?
b. What is the total inventory cost of fertilizer for KCFC?
c. What should be re-ordered point (level) of fertilizer for KCFC?