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

Annual demand is 33,000 packages per year. The purchase price per package is $49.
What are the relevant total costs at the economic order quantity?

Question

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

Annual demand is 33,000 packages per year. The purchase price per package is $49.
What are the relevant total costs at the economic order quantity?

Quizplus · Accepted Answer

Unit carrying costs = ($49 × 0.13) + $5 = $11.37
EOQ = 11ea1398_f0eb_9929_a1e4_4977b90336a8_TB3027_11 = 1651.74 units
Annual relevant carrying costs = (1651.74 / 2) × $11.37 = $9390
Annual relevant ordering costs = (33,000 / 1651.74) × $470 = $9390
Total costs at the economic order quantity = $9390 + $9390 = $18,780

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