Fisk Corporation is trying to improve its inventory control system and has installed an online computer...

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 98,000 units per year, an ordering cost of $12 per order, and carrying costs of $1.20 per unit. a. What is the economic ordering quantity? b. How many orders will be placed during the year? c. What will the average inventory be? d. What is the total cost of ordering and carrying inventory?

Solutions

Expert Solution

a) Economic Order Quantity (EOQ):

Where,
AD = Annual Demand in units
OC = Ordering cost per order
CC = Carrying cost per unit

Therefore,

b) Number of orders per year.

c. Average inventory.

d) Total cost of ordering and carrying inventory.

You can notice that in EOQ ordering cost and carrying cost will be equal.

jeff jeffy answered 1 year ago

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