The Trektronics store begins each week with 340 phasers in stock. This stock is

Question

The Trektronics store begins each week with 340 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $29 per year and the fixed order cost is $66. What are the current total carrying costs? (Do not round intermediate calculations.) What are the current restocking costs? (Do not round intermediate calculations.) What is the economic order quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Should Trektronics increase or decrease its order size? 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.)

Explanation / Answer

Carrying costs:

= 340×$29×0.5

= $4,930

Restocking costs:

= $66×52

= $3,432

Economic ordering quantity:

= (2×Annual requirement×buying cost per order÷Carrying cost per unit)^(1÷2)

= (2×340×52×$66÷$29)^(1÷2)

= 283.68 units per order

Trektronics should decrease order size.

Orders under new policy:

= 340×52÷283.68

= 62.32 orders

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