Karloff Medical Supply maintains an average inventory of 2,000 human skulls for sale to medical schools and filmmakers. The carrying cost per skull per year is estimated to be $5. Boris places an order for 10,000 skulls on the first of each month and the order cost is $75. What are the total carrying costs using the EOQ?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to minimize the total inventory costs. The carrying cost is calculated as (EOQ/2) * carrying cost per unit. Given the average inventory is 2,000, the carrying cost is 2,000 * $5 = $10,000. However, using EOQ, the carrying cost is minimized to $4,743.

Karloff Medical Supply Maintains an Average Inventory of 2,000 Human