Question

For certain item, the cost minimizing other quantity obtained with the basic EOQ model is 100 units, and the total annual inventory( holding and setup) cost is $300, what is the holding cost per year for this item?a. $1.50 b. $2.00 c. $3.00 d. $150.00 e. Not enough data to determine

Answer 1

c. $3.00

Step-by-step explanation:

We know that

Average Holding cost = average inventory based on Economic order quantity × carrying cost per unit

$150 = 50 units × carrying cost per unit

So, the carrying cost would be $3

The computation is shown below:

The average carrying cost would be $300 ÷ 2 = $150

And, the average inventory would be 100 units ÷ 2 = 50 units