A university credit union that serves a very large student population has an ATM

Question

A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. What is the Inventory turnover for this ATM machine?

Select one:

A. 200 turns

B. 14.4 turns

C. 28.8 turns

D. 52 turns

Explanation / Answer

average cash withdrawal =40

average number of withdrawal per week=200

1 year= 52 weeks

average annual cash withdrawal (D)=40*200*52=416000

Holding cost (H) =0.1 /year

Ordering cost (O)=100

EOQ= sqrt(2*D*O/H)= sqrt(2*416000*100/0.1)=28844.41

hence average number of turns=416000 / 28844.41= 14.42

hence answer is B

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