Question

For a company purchasing an item with an annual demand of 2,000 units, what are the costs associated with ordering and purchasing, and what is the economic order quantity?

Answer 1

The costs associated with ordering and purchasing for a company can vary and include administrative costs and fees. The economic order quantity (EOQ) is a calculation used to determine the optimal order quantity. To calculate the EOQ, you will need to know the specific costs for ordering and holding inventory.

Step-by-step explanation:

The costs associated with ordering and purchasing for a company can include the cost of placing an order, such as administrative costs and any fees associated with processing the order. The cost of purchasing is the cost of acquiring the item itself. These costs can vary depending on the company's operations and the specific item being purchased.

The economic order quantity (EOQ) is a calculation used to determine the optimal order quantity that minimizes the total cost of ordering and holding inventory. The formula for EOQ is:
EOQ = sqrt((2 * D * S) / H)
where D is the annual demand, S is the cost of placing an order, and H is the annual holding cost per unit.

Using the given information, the annual demand is 2,000 units. To calculate the EOQ, you will need to know the specific costs associated with ordering and holding inventory for this company.