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 | ||||

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