Redan Manufacturing uses 3,300 switch assemblies per week and then reorders anot

Question

Redan Manufacturing uses 3,300 switch assemblies per week and then reorders another 3,300. The relevant carrying cost per switch assembly is $14.00, and the fixed order cost is $1,650.

Calculate the economic order quantity. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

I NEED REAL HELP.

Please, anyone smart.

Redan Manufacturing uses 3,300 switch assemblies per week and then reorders another 3,300. The relevant carrying cost per switch assembly is $14.00, and the fixed order cost is $1,650.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Annual Holding Cost = Average Inventory Level*Holding Cost Per Unit Per Year = 3300*14*1/2 = 23100

Part B:

Annual Ordering Cost = No. Of Orders Placed In a Year*Cost Per Order = 52*1650 = 85800

Part C:

EOQ = (2*3300*52*1650/14)^1/2 = 6359.92 Units

Thanks.

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