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

The average inventory level can be calculated by dividing the EOQ by 2, as the EOQ represents the order quantity that minimizes both ordering and carrying costs.

EOQ = √[(2 x 2,500 x $45)/$5] = 212

Average inventory level = EOQ/2 = 212/2 = 106 units.

Therefore, the best choice is C.

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