Question

# C&A purchases cases of chemicals from ABC who charges \$ 30 per order and \$ 50...

C&A purchases cases of chemicals from ABC who charges \$ 30 per order and \$ 50 per case. Each case has 5 bags of chemicals . C&A needs 2000 bags of chemicals per year. C&A’s annual holding costs are 30%. If C&A uses the Economic Order Quantity when placing orders. What is the annual ordering and holding cost per case of chemicals ? I got \$1.5 and my friend got \$1341.66

Solution :-

Annual Sales ( A ) = 2000 Bags = 400 Case

Ordering Cost ( O ) = \$30

Holding Cost ( C ) = \$50 * 30% = \$15

EOQ = ( 2AO/C )1/2

EOQ = * ( 2 * 400 * \$30 / \$15 )1/2

EOQ = ( 1,600 )1/2

EOQ = 40 Cases

Total Ordering Cost = ( \$30 * 400 / 40 ) = \$300

Total Carrying Cost = ( \$15 * \$400 / 2 ) = \$3,000

Total Holding and Carrying Cost in a year = \$300 + \$3,000 = \$3,300

The annual ordering and holding cost per case of chemicals = \$3,300 / 400 = \$8.25 per case

Note :- Your Both answer are incorrect as you solve with out converting number of bags into case As all figures are given as per case

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