The Trektronics store begins each week with 480 phasers in stock. This stock is

Question

The Trektronics store begins each week with 480 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $43 per year and the fixed order cost is $87.

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

The Trektronics store begins each week with 480 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $43 per year and the fixed order cost is $87.

Explanation / Answer

Answer: Calculation of the Total Carrying cost:

Total carrying costs=Average inventory*Carrying cost per unit

=(480/2)*$43=$10320

Answer: The order costs are the number of orders times the cost of an order, so:

Restocking costs = 52($87) = $4524

Answer: EOQ=Square root of [(2*480*52 weeks*$87)/$43]

=318 units

Answer: The number of orders per year will be the total units sold per year divided by the EOQ, so:

=480*52/318=78.49 order

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