Diagnostic Supplies has expected sales of 84,100 units per year, carrying costs
ID: 2776093 • Letter: D
Question
Diagnostic Supplies has expected sales of 84,100 units per year, carrying costs of $5 per unit, and ordering cost of $10 per order. What is the economic ordering quantity? Economic ordering quantity units What is the average inventory? Average inventory units What is the total carrying cost? Total carrying cost $ Assume an additional 80 units of inventory will be required as safety stock. What will the new average inventory be? Average inventory units What will the new total carrying cost be? Total carrying cost $Explanation / Answer
a) EOQ =Square root of [(2 * annual quantity *per order cost) / carrying cost]
=square root of [(2* 84100 * 10) / 5 ]
= square root of [1,682,000 /5]
= square root of 336,400
= 580 units
b-1)Average inventory = 580 / 2 = 290units
b-2) carrying cost = 290 * 5 =$ 1450
c-1) Average inventory = (580 +80 )/2 = 660 /2
= 330 units
c-)carrying cost= 330 * 5 = $ 1650