Question

XYZ purchases 20,000 unit of a product each year in lots of 1,000 units per order. The cost of placing an order is $20 and the cost of carrying one unit of product in inventory is $30 per year.

Required:

How many orders is placed per year?

What is the total ordering costs per year?

What is the total carrying cost of the inventory per year?

What is the total cost of carrying and ordering for the year?

What is the EOQ amount? What would the total cost of carrying and ordering be for the year if the EOQ amount was used?

Answer #1

1. Number of orders per year = total units purchased/number of units in per order = 20000/1000= 20 orders

2. Total ordering cost = ordering cost per order* number of orders = 20*20=400

3. Total carrying cost = carrying cost per unit*number of units= 30*20000= 600000

4. Total ordering and carrying cost= 400+600000= 600400

5. EOQ= Square root of (2 x demandx ordering cost/carrying cost) = (2*20000*20/30)^(1/2)= 163 units

Total ordering and carrying cost = ((20000/163*20)+(20000*30)= 2454+600000= 602454

Question 3
EOQ, ORDERING COST, CARRYING COST, AND TOTAL INVENTORY
RELATED COST (LO 3)
Franklin Company purchases 4,500 units of Widgelets each year in
lots of 500 units per order. cost of placing one order is $22, and
the cost of carrying one unit of product in inventory for a year is
$8.80.
Required:
1 What is the EOQ for Widgelets?
2 How many orders for Widgelets will Franklin place per year
under the EOQ policy?
3 What is the...

Economic Order Quantity
Ottis, Inc., uses 731,025 plastic housing units each year in its
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The cost of holding one unit of inventory for one year is $15.
Currently, Ottis places 171 orders of 4,275 plastic housing units
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Required:
1. Compute the economic order quantity.
units 1,710
2. Compute the ordering, carrying, and total
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$__________
Carrying cost
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Total cost
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1.XYZ is a retailer and sells 144,000 units per year.
It purchases from a single supplier. Fixed costs per order are
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It purchases from a single supplier. Fixed costs per order are
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URGENT
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The economic order quantity (EOQ) is 500.
The economic order quantity (EOQ) is less than 500.
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a company decides to establish an EOQ for an item. The annual
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