#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 |
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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