Redan Manufacturing uses 3,100 switch assemblies per week and then reorders anot

Question

Redan Manufacturing uses 3,100 switch assemblies per week and then reorders another 3,100. The relevant carrying cost per switch assembly is $13.00, and the fixed order cost is $1,550.

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

Redan Manufacturing uses 3,100 switch assemblies per week and then reorders another 3,100. The relevant carrying cost per switch assembly is $13.00, and the fixed order cost is $1,550.

Explanation / Answer

current carrying cost=Average Stock*Unit Carrying cost=3100*13=40300

Order Cost=No of weeks in a Year* Unit Order cost=52*1550=80600

EOQ=Square Root(2AB/S), where A=Annual Stock , B=Ordering Cost , S=Storage Cost

=Square Root(2*3100*12*1550/13)=2978.38 or say 2979.

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