Louise Manufacturing uses 2,600 switch assemblies per week and then reorders ano

Question

Louise Manufacturing uses 2,600 switch assemblies per week and then reorders another 2,600. The relevant carrying cost per switch assembly is $10.50, and the fixed order cost is $1,300. What are the current carrying costs? (Do not round intermediate calculations.) Carrying costs $ What are the order costs? (Do not round intermediate calculations.) Order costs $ Calculate the economic order quantity. (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) EOQ

Explanation / Answer

a. Total Carrying costs = 2600*10.50 = 27,300

b. The total order costs are 1300 for 52 weeks = 1300*52 = 67,600

c. The EOQ is calculated as follows:

EOQ = sqrt (2*T*F/CC)

T = 2600*52 = 135200, F = 1300 and CC =10.50

Hence EOQ = sqrt (2*135200*1300/10.50) = 5786.025 units = 5,786.03 Units

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