The Canine Kennel uses 600 cases of dog food annually and orders 40 cases in each shipment.The annual carrying cost per case is $5 and the economic order quantity is 25 cases.Which one of these statements best applies to this situation?
A) The current annual ordering costs exceed $5 per case.
B) The firm needs to increase its average inventory level of dog food.
C) The current annual ordering costs are less than the carrying costs.
D) The firm needs to reduce the number of orders placed per year.

Question

Quizplus · Accepted Answer

At 40 cases per order, the size of the order exceeds the EOQ of 25 cases. This means the carrying costs are larger than the order costs. See Figure 20.7 in the text.

The Canine Kennel Uses 600 Cases of Dog Food Annually