Redan Manufacturing uses 2,100 switch assemblies per week and then reorders anot

Question

Redan Manufacturing uses 2,100 switch assemblies per week and then reorders another 2,100. The relevant carrying cost per switch assembly is $8.00, and the fixed order cost is $1,050.

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 2,100 switch assemblies per week and then reorders another 2,100. The relevant carrying cost per switch assembly is $8.00, and the fixed order cost is $1,050.

Explanation / Answer

Redan Manufacturing uses 2,100 switch assemblies per week and then reorders another 2,100. The relevant carrying cost per switch assembly is $8.00, and the fixed order cost is $1,050.

What is the current carrying cost?

  Carrying cost = 2100/2* 8

  Carrying cost= $ 8400

What is the order cost?

Total Annual order cost = $ 1050 * 52

Total Annual order cost = $ 54600

  Order cost $   54,600

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

  EOQ = (2*C*0/i)^(1/2)

  EOQ = (2*2100*52*1050/8)^(1/2)

EOQ = 5353.97

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