Answered

Get the answers you need at Westonci.ca, where our expert community is dedicated to providing you with accurate information. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 1,700 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $8 per unit of average inventory. Every time an order is placed for more of item X, it costs $26. a. Whenever item X is ordered, what should the order size be

Sagot :

Shahzaibfaraz

Answer:

EOQ = 105.11898 rounded off to 105 units per order

Explanation:

To calculate the optimum order size when each order is placed, we need to find the EOQ or Economic order quantity. It is the quantity that should be ordered each time to minimize the inventory related costs. The formula to calculate EOQ is attached. The EOQ is calculated as follows.

EOQ = √[(2 * 1700 * 26) / 8]

EOQ = 105.11898 rounded off to 105 units

View image Shahzaibfaraz
We hope our answers were useful. Return anytime for more information and answers to any other questions you have. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.