Ranger Company purchases 19,880 units of Product Beta each year in lots of 864 units per order....
Question:
Ranger Company purchases 19,880 units of Product Beta each year in lots of 864 units per order. The cost of placing one order is $14, and the cost of carrying one unit of product in inventory for a year is $10.
1. What is the EOQ for Beta?
2. How many orders for Beta will Ranger place per year under the EOQ policy?
3. What is the total ordering cost of Beta for a year under the EOQ policy?
4. What is the total carrying cost of Beta per year under the EOQ policy?
5. What is the total cost of Ranger's inventory policy for Beta per year under the EOQ policy?
Economic Order Quantity:
The economic order quantity is that mathematically computed quantity at which the total order cost and total carrying cost will be almost equal, and the total inventory cost will be at a minimum.
Answer and Explanation: 1
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Answer 1.
We know that,
{eq}EOQ=\sqrt{\dfrac{\text{2 * Annual Demand * Order Cost}}{\text{Holdingcost}}} {/eq}
Here,
- Annual Demand = 19,880...
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Inventory Management Techniques
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Chapter 19 / Lesson 8
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The amount of product that a company must keep in storage will depend on the inventory management process. Learn about inventory management techniques and discuss three major approaches: the ABC approach, the economic order quantity model, and derived-demand inventory.
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