What is the average inventory level, based on EOQ, for a firm that has annual sales of 2,500 units, costs per order of $45, and carrying costs of $5 per unit?

Question

Quizplus · Accepted Answer

EOQ formula is:

EOQ = sqrt((2DS)/(H))

Where, 
D = Annual demand
S = Cost per order
H = Annual carrying cost per unit

Plugging in the values, 
EOQ = sqrt((2*2500*45)/5) = 106.07

Therefore, the average inventory level is 106.

What Is the Average Inventory Level, Based on EOQ, for a Firm