Fisk Corporation is trying to improve its inventory control system and has insta

Question

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 54,000 units per year, an ordering cost of $12 per order, and carrying costs of $1.60 per unit. a. What is the economic ordering quantity? Economic ordering quantity units b. How many orders will be placed during the year? Number of order orders c.What will the average inventory be? Average inventory units d. What is the total cost of ordering and carrying inventory? Total cost

Explanation / Answer

Economic Order Quantity =(2*Annual Demand*Cost of placing 1 order/Cost of handing per unit per year)^(1/2) Annual Demand 54000 Cost of placing 1 order 12 Storage cost 1.6 Solution to 1 Putting all these factors in EOQ formula =(2*54000*12/1.6)^(1/2) Economic Order quantity                900 Solution to 2 Total No of orders =54000/900 60 So total 60 orders will be placed Solution to 3 Average Inventory 900/2 450 Solution to 4 Annual ordering cost Total no of orders * order cost per unit =60*12 720 Annual Annual holding cost EOQ*Annual holding cost/2 =900*1.6/2 720 Total Cost 720+720 1440

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