Bishop Manufacturing is implementing an economic order quality (EOQ) inventory control system and needs a good estimate of the cost to process a purchase order (PO). It takes 5 total labor hours to process a PO. The average number of SKUs on a PO is 2.2. The average wage for people working in the purchasing department is $22 per hour plus employee benefits of $3 per hour. Fixed costs for the purchasing department are $250,000 per year assuming a 2,000 hour per employee per year work week. Given this information, what is a good estimate of the cost to process one purchase order?

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The Answer of Bishop Manufacturing is implementing an economic order quality (EOQ) inventory control system and needs a good estimate of the cost to process a purchase order (PO). It takes 5 total labor hours to process a PO. The average number of SKUs on a PO is 2.2. The average wage for people working in the purchasing department is $22 per hour plus employee benefits of $3 per hour. Fixed costs for the purchasing department are $250,000 per year assuming a 2,000 hour per employee per year work week. Given this information, what is a good estimate of the cost to process one purchase order?

Bishop Manufacturing Is Implementing an Economic Order Quality (EOQ) Inventory