Question

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

Answer #1

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 =

If there is any doubt please ask in comments .......

**Thank you please rate .....**

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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