Question

You have a product with an EOQ of 1475 , annual demand of 5500 , and total annual inventory costs of 1420. What is your ordering cost per order? If there is insufficient data to answer just enter 0 , otherwise provide the ordering cost to two decimal places.

Answer 1

The ordering cost per order can be calculated using the EOQ formula, which involves the annual demand, total annual inventory costs, and EOQ value. Substituting the given values and solving for the ordering cost results in a value of approximately 224.92.

Step-by-step explanation:

The ordering cost per order can be calculated using the Economic Order Quantity (EOQ) formula:

EOQ = √((2 * annual demand * ordering cost) / total annual inventory costs)

Given the values provided:

EOQ = √((2 * 5500 * ordering cost) / 1420)

Simplifying the equation and substituting the given EOQ value:

1475 = √(9680 * ordering cost)

Squaring both sides of the equation:

2175625 = 9680 * ordering cost

Solving for the ordering cost:

ordering cost = 2175625 / 9680

ordering cost ≈ 224.92 (rounded to two decimal places)