Hardy Hospital Inventory Estimates | Assignment

Running head: HARDY HOSPITAL INVENTORY 1
Hardy Hospital Inventory
Name
Institution

HARDY HOSPITAL INVENTORY 2
Hardy Hospital Inventory
1. Estimates of;
a) Order cost
Given that the heads of departments are the persons responsible for ordering an order, and
it takes the purchasing, accounts payable and receiving personnel 3 hours to process a single
order. 3 people spent 3 hours to process an order, the estimated order costs therefore is
Number of people * hours spent * hourly cost= 3*3*20= $180.00
b) Inventory carrying cost
Space used is approximated to be 36 750sq ft, each sq. ft cost $4.60,
The total cost of space is 36750*4.60= 169050/=
5 workers are required in the warehouse and each is paid $32000 plus 20% benefits
=32000+ (0.20*32000)= 38400, for 5 workers ; 38400*5=$192,000
Other costs = $200000
Total cost of storage= $ 200,000+ $192,000+ $169050= $561,050
This amount is used to store $ 4,150, 000.00 worth of stock. The inventory cost is
therefore 561,050/4150000= $0.1352 per $1 of stock per year.
2. EOQ= √ 2∗demand∗ordering costs/carrying costs
=√2∗11.63∗180/0.1352= √ 30967.46
EOQ= 175.9757= 176