In: Accounting
Given the following facts for the Histep Company:
Differential costs per order |
$20 |
Annual requirement |
1,000 units |
Inventory carrying costs |
$1.00 per unit per year |
Purchase cost per unit |
$10 |
REQUIRED:
a. |
Complete the following chart: |
Average Annual Orders |
Order Size |
No. of Units in Inventory |
Inventory Carrying Costs |
Order Costs |
Total Costs |
2
4
5
8
10
b. |
Using trial and error, which order size should be used? |
c. |
Using the economic order quantity formula, what is the optimal number of units in each order? |