Stanford Ltd. purchases 1,600,000 units of its product every year. The ordering costs are $50 per order and the annual carrying cost of one unit is $1.60. Under its current inventory policy, it purchases the units 80 times during the year (in batches of 20,000 units per order).
Required:
a. Calculate the EOQ for Stanford Ltd.
b. By ordering at the EOQ, how much in inventory costs will Stanford save per year?

Question

Quizplus · Accepted Answer

The Answer of Stanford Ltd. purchases 1,600,000 units of its product every year. The ordering costs are $50 per order and the annual carrying cost of one unit is $1.60. Under its current inventory policy, it purchases the units 80 times during the year (in batches of 20,000 units per order).
Required:
a. Calculate the EOQ for Stanford Ltd.
b. By ordering at the EOQ, how much in inventory costs will Stanford save per year?