Question

Diagnostic Supplies has expected sales of 180,500 units per year, carrying costs of $4 per unit, and an ordering cost of $10 per order. a. What is the economic ordering quantity? b-1. What is the average inventory? b-2. What is the total carrying cost? Assume an additional 70 units of inventory will be required as safety stock. c-1. What will the new average inventory be? c-2. What will the new total carrying cost be?

Answer 1

Please provide rating..

	Given that-
	Expected sales =		180,500
	carrying costs		4	per unit
	ordering cost =		10	per order
ans a	EOQ =		=(2*annual cost*order cost/Carrying cost)^0.5
			=(2*180500*10/4)^0.5
			950	unit
ans b	Average inventory = 950/2			475	unit
ans c	Total carrying cost = 475*4			1900
additional 70 units of inventory will be required as safety stock
Ans d	Average inventory = 475+70			545
Ans e	Carrying cost =	=545*4		2180