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You need to purchase 30,000 flash drives this year from your supplier. It costs your company $250 every time you place an order and your company estimates the carrying cost of inventory at 20% of product
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You need to purchase 30,000 flash drives this year from your supplier. It costs your company $250 every time you place an order and your company estimates the carrying cost of inventory at 20% of product cost. The supplier offers you the following discounts. How many flash drives should be ordered from the supplier each time you place an order

User Sandip Patel
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1 Answer

29 votes
29 votes

Answer:

2,402 units (flash drives) order should be placed from supplier each time

Step-by-step explanation:

The question would be solved using EOQ (Economic Order Quantity) formulae. Moreover, in this particular question the supplier offering discount table is missing. As per the original question where the table is provided the discounted price supplier is offering for over 2000 units bought is $13.

EOQ = √[(2(ARU) (OC))] / IU x CC

where:

ARU = Annual Required Units

OC = Ordering Cost per Unit

IU = Inventory Unit Cost

CC = Carrying Cost as percentage of Unit Cost

EOQ = √[(2(30,000) (250))] / 13 x 0.2

EOQ = √5,769,231

EOQ = 2,402 units

User Tiffaney
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