Question

Cute Pet Manufacturing assembles security systems. It purchases 3600 high-definition
security cameras a year at $ 180 each. Ordering costs are $50, and annual carrying costs are
20 percent of the purchase price.

Compute the economic order quantity and annual cost of carrying and ordering the inventory.

please show work to assist! thank you

Answer 1

Given,

Annual purchase or annual demand (D) = 3600

Purchase price (P) = $180 each

Annual carrying or holding cost (H) = 20% of P

=> H = 20/100 x $180 = $36

Ordering costs (S) = $50

Now, we know that economic order quantity (EOQ) is given by,

=>

=> units

Annual cost of carrying inventory () is given by,

=>

Annual cost of ordering () is given by,

=>

Ttal cost of carrying and ordering the inventory =