Use the following information to answer the question below.
If annual sales volume in units = 20,000
OC = $100/order
CC = $150/unit
-Calculate the total inventory costs, assuming an EOQ ordering policy is followed, and inventory is used at a regular and even rate throughout the year.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to minimize total inventory costs. The EOQ is calculated as √((2DS)/H), where D is the demand (20,000 units), S is the ordering cost ($100), and H is the holding cost per unit ($150). The EOQ is √((2*20000*100)/150) = 516.4 units. The total inventory cost is the sum of ordering costs and holding costs: (D/EOQ)*S + (EOQ/2)*H = (20000/516.4)*100 + (516.4/2)*150 = $24,525.

Use the Following Information to Answer the Question Below