Diagnostic Supplies has expected sales of 136,900 units per year, a carrying cos
ID: 2693460 • Letter: D
Question
Diagnostic Supplies has expected sales of 136,900 units per year, a carrying cost of $2 per unit, and an ordering cost of $4 per order. (a) What is the economic order quantity? Economic order quantity units (b-1) What is average inventory? Average inventory units (b-2) What is the total carrying cost? (Omit the "$" sign in your response.) Total carrying cost $ Assume an additional 90 units of inventory will be required as safety stock. (c-1) What will the new average inventory be? Average inventory units (c-2) What will the new total carrying cost be? (Omit the "$" sign in your response.) Total carrying cost $Explanation / Answer
a)EOQ =[2SO/C]
where S=Expected sales=136,900 units
O-ordering cost=$4 per order
C=carrying cost=$2 per unit
EOQ =[2*136,900*4/2]
EOQ=740
b)
Average Inventory=EOQ/2=740/2
Average Inventory=370 units