A manufacturer replenishes their packaging materials according to the economic order quantity model. They use 25,000 cases of packaging materials per year and order 500 cases at a time. Their cost to carry a case in inventory for a year is $12. How much does it cost them to place an order with their supplier?

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) model formula for the number of orders per year is Demand/Order Quantity. Here, it's 25,000/500 = 50 orders per year. The carrying cost per year is given as $12 per case. The EOQ model states that the carrying cost equals the ordering cost. Therefore, the ordering cost is $12 * 500 / 2 = $60 per order.

A Manufacturer Replenishes Their Packaging Materials According to the Economic