Response to the following problem:
Thompson Paint Company uses 60,000 gallons of pigment per year. The purchasing price of the pigment is $50 per gallon. The cost of ordering pigment is $300 per order, and the cost of carrying the pigment in inventory is $1 per gallon per year. The firm uses pigment at a constant rate every day throughout the year.
Calculate the EOQ
Compute total inventory costs including Annual purchases, Annual order costs and Annual carrying costs on the basis of EOQ calculated in requirement 1.
The firm operates 365 days per year and maintains a minimum inventory level of 2 days' worth of pigment. Assuming that it takes 10 days to receive an order once it has been placed, determine the reorder point in terms of gallons of pigment. calculate the recorder point.