M chapter 13 Homework 1 × ezt Question 3 (of 5) value 9.00 points Problem 13-6 A

Question

M chapter 13 Homework 1 × ezt Question 3 (of 5) value 9.00 points Problem 13-6 A produce distributor uses 700 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 35 percent of the purchase price per crate. Ordering costs are $28. Currently the manager orders once a month How much could the firm save annually in ordering and carrying costs by using the E0Q? (Round intermediate calculations and final answer to 2 decimal places. Omit the "S" sign in your response.) Savings sper year References eBook & Resources Worksheet Difficulty 2 Medium Problem 13-6 Leaning Objective 13-08 Describe the basic EOQ model and its assumptions and solve n Cortana. Ask me anything.

Explanation / Answer

Economic Order Quantity

EOQ = Square root of    { (   2 X annual demand quantity X   fixed cost per order ) / annual                holding cost per unit }

Annual demand                         = 700 x 12 = 8400

Fixed cost per order                 = 28

Carrying cost                            = 35%

EOQ = Square root of {( 2 x 8400 x 28 ) / 00.35} = 1159.31

EOQ = 1159.31

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