Problem NO: 7

The two-bin approach is used to control inventory for a particular low-cost component. Each bin\nholds 1200 units. The annual usage of the component is

The two-bin approach is used to control inventory for a particular low-cost component. Each bin

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holds 1200 units. The annual usage of the component is 45,000 units. Cost to order the component

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is around $70. (a) What is the imputed holding cost per unit for this data? (b) If the actual annual

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holding cost per unit is only 7 cents, what lot size should be ordered? (c) How much more is the

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current two-bin approach costing the company annually, compared to the economic order quantity?

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