Hawthorne Ltd. purchases 1,500,000 units of its product every year. The ordering costs are $30 per order and the annual carrying cost of one unit is $1.60. Under its current inventory policy, it purchases the units 150 times during the year (in batches of 10,000 units per order).
Required:
a. What is the total cost per year of inventory under the current inventory policy?
b. Calculate the EOQ for Hawthorne Ltd.
c. What is the total annual cost of inventory under the EOQ purchasing policy?

Question

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The Answer of Hawthorne Ltd. purchases 1,500,000 units of its product every year. The ordering costs are $30 per order and the annual carrying cost of one unit is $1.60. Under its current inventory policy, it purchases the units 150 times during the year (in batches of 10,000 units per order).
Required:
a. What is the total cost per year of inventory under the current inventory policy?
b. Calculate the EOQ for Hawthorne Ltd.
c. What is the total annual cost of inventory under the EOQ purchasing policy?