The Trektronics store begins each week with 300 phasers in stock. This stock is
ID: 2768831 • Letter: T
Question
The Trektronics store begins each week with 300 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $25 per year and the fixed order cost is $60. What are the current total carrying costs? (Do not round intermediate calculations.) Carrying costs $ What are the current restocking costs? (Do not round intermediate calculations.) Restocking costs $ What is the economic order quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) EOQ $ Should Trektronics increase or decrease its order size? Decrease Increase How many orders per year will Tektronics place under the new policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Orders per year $
Explanation / Answer
Total carrying costs:
= 300×$25
= $7,500
Total restocking costs:
= 52×$60
= $3,120
Economic ordering quantity:
= (2×Annual requirement×buying cost per order÷Carrying cost per unit)^(1÷2)
= (2×300×52×$60÷$25)^(1÷2)
= 273.64 units
It should reduce order size to 273.64 units.
Number of orders (New) = 300×52÷273.64 = 57 Orders
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