The mechanical engineer at Robinson Manufacturing has developed anew gearbox. The local distributor expects to increase his sales by 30% over the past year due to this new development. Last year’s sales were $70,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice. Relevant cost information includes:Warehouse space $3.00/unitMaterial handling expense $2.00/unitInsurance premium $1.00/unitTotal ordering cost $150.00/per orderPlease show all calculationsWhat is the economic order quantity? (2 marks)What is the amount of average inventory? (2 marks)How many orders will be made per year? Round to 2 decimal places. (2 marks)What is the total cost of this inventory decision? (2 marks)What would be the advantage and disadvantage if the company decided to carry safety stock? Explain your answer in sentence form. Calculations are not required. ( 2 marks)AccountingBusinessFinancial AccountingFINANCE 4403
