Answer to Question #97732 in Financial Math for bin aftab

Question

Identify an example of inventory in your own life. Estimate how much it costs you to hold this inventory. Estimate the "ordering cost." How often do you replenish this inventory, and which of the inventory policies does this most closely resemble?

Answer 1

Example For Estimating the cost

We need to Estimate the cost to hold this inventory and ordering cost.

Answer:

I am taking An example of an inventory in our own Life is Ream of Papers.

There will be 10 reams in one case.

The cost of one case Will be Around $300

The Paper will be usually last per one year.

We can assume the holding cost of inventory is 10%.

So, the holding cost of inventory would be = 10% of 300 = $30

Ordering cost would be sum of the cost of case of reams and shipping charges

Let the shipping charge = $15

So, Ordering cost = 300 + 15 = $330

We usually replenish this inventory once per a year.

The good and best inventory policy will be First in and First out.

If not older stationaries fade out and will not saleable.