Question

#14 The total cost per year for Problem 13, assuming no stockout, is approximately equal to...

#14 The total cost per year for Problem 13, assuming no stockout, is approximately equal to

A. The Total Cost cannot be determined from the given information
B. $636
C. $1,273
D. $6,360
E. $12,727

Problem 13 is below:

Consider this data for a local manufacturer; the unit item cost = $25, annual carrying charge = 60%, annual demand = 3600 units and ordering cost = $15 per order, the EOQ is:

A. 60.00
B. 84.85
C. 141.42
D. 293.94
E. 7200
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Answer #1

13

Economic order quantity = ((2*annual demand quantity* fixed cost per order)/ annual holding cost per unit)^(0.5)

=((2*3600*15/(25*0.6)))^0.5

=84.85

Average inventory level = EOQ/2 = 84.85/2 = 42.425

Number of orders = sales/EOQ = 3600/84.85=42.427

Annual ordering cost = annual demand quantity* fixed cost per order/EOQ

=3600*15/84.85=636.417

Annual carrying cost = Average inventory level* annual holding cost per unit = 42.425*25*0.6=636.375

Total cost = Annual ordering cost+ Annual carrying cost = 636.417+636.375=1273

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