Cheeseburger and Taco Company purchases 14,321 boxes of cheese each year. It costs $26 to place...

Cheeseburger and Taco Company purchases 14,321 boxes of cheese each year. It costs $26 to place and ship each order and $6.91 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders.

What is the average inventory held during the year?

Solutions

Expert Solution

Here EOQ = [(2*annual demand*cost per order/holding cost)]^0.5

= [(2*14321*26/6.91)]^0.5

= 107770.19^0.5

= 328.28

Thus average inventory = EOQ/2 = 328.28/2 = 164.14

Average inventory held during the year is 164 (rounded to nearest whole number) or 164.14 (2 decimal place)

jeff jeffy answered 2 years ago

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