The Dress Designer uses 15,000 zippers a year in its production process. Currently, it purchases 1,000 zippers at a time and replenishes its inventory when it is depleted. The carrying cost per zipper is $.39. The fixed order cost is $35. How should The Dress Designer change its order quantity?

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to determine the optimal order quantity that minimizes total inventory costs. The EOQ is calculated as √((2DS)/H), where D is the demand (15,000 zippers), S is the order cost ($35), and H is the carrying cost per unit ($0.39). Calculating EOQ gives approximately 1,641 units. The current order quantity is 1,000 units, so the order quantity should be increased by 641 units to reach the EOQ.

The Dress Designer Uses 15,000 Zippers a Year in Its