The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items:

Annual demand is 34,000 packages per year. The purchase price per package is $51.
What is the annual relevant ordering costs?

Question

The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items:

Annual demand is 34,000 packages per year. The purchase price per package is $51.
What is the annual relevant ordering costs?

Quizplus · Accepted Answer

Unit carrying costs = ($51 × 0.13) + $5 = $11.63
EOQ = 11ea1398_f0eb_7215_a1e4_d164d9caee8f_TB3027_11 = 1793.27 units
Annual relevant ordering costs = (34,000 / 1793.27) × $550 = $10,428

The Allianz Company Produces a Specialty Wood Furniture Product, and Has