Chapter 13 quiz [Compatibility Mode] - Word Mailings Review View ACROBAT Tell me
ID: 331797 • Letter: C
Question
Chapter 13 quiz [Compatibility Mode] - Word Mailings Review View ACROBAT Tell me what you want to d AaBbccDc AaBbCcDx AaBbC AaBbcct AaB A | ?_ .|e-in, 11 TT Normal Heading 2 a. TNoSpac Heading 1 Title Paragraph Styles 10. If a company has an ordering cost of $250, a carrying cost of $4 per unit, and annual product demand of 6,000 units, the optimal order quantity is approximately a. 923 b. 866 C. 751 d. 1,027 11. If a company has an ordering cost of $250, a carrying cost of $4 per unit, and annual product demand of 6,000 units, the total minimum inventory cost is approximately a. $3,464 b. $3,250 c. $3,944 d. $2,921Explanation / Answer
10) Solution:
The Economic order quantity (EOQ) or optimal order quantity is calculated as;
EOQ = SQRT (2*D*Co) / Cc
where,
D = Annual demand
Co = Ordering costs
Cc = Carrying costs
Putting the given values in the above formula, we get;
EOQ = SQRT [(2 x 6000 x 250) / 4]
EOQ = SQRT (750000)
EOQ = 866.03 or 866 (rounding off to nearest whole number)
Answer: Option (B) - EOQ = 866 units
11) Solution:
Total minimum inventory cost is calculated as;
Total cost = Annual ordering cost + Annual carrying cost
Total cost = (D/EOQ x Co) + (EOQ/2 x Cc)
where,
EOQ = Economic order quantity
D = Annual demand
Co = Ordering costs
Cc = Carrying costs
The Economic Order Quantity (EOQ) = SQRT [(2 x D x Co) / Cc]
EOQ = SQRT [(2 x 6000 x 250) / 4]
EOQ = 866 units
Putting the given values in the above formula, we get;
Total cost = (D/EOQ x Co) + (EOQ/2 x Cc)
Total cost = (6000/866 x 250) + (866/2 x 4)
Total cost = $1732 + $1732
Answer: Option (A) - Total cost = $3,464
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