Question

Cheeseburger and Taco Company purchases 7,492 boxes of cheese each year. It costs $18 to place and ship each order and $3.05 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the average inventory held during the year?

Round the answer to the whole number

Answer #1

Economic order quantity | = | ((2*A*O)/C)^(1/2) | Where, | ||||||

= | ((2*7492*18)/3.05)^(1/2) | A | = | Annual demand | = | 7,492 | Units | ||

= | 297 | Units | O | = | Ordering cost per order | = | $ 18 | per order | |

C | = | Carrying cost per unit | = | $ 3.05 | per unit | ||||

Average inventory | = | 1/2*(Economic order quantity) | |||||||

= | 1/2*(297) | ||||||||

= | 149 | units |

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