Ordering and Carrying Costs, EOQ
Q-Beck Company uses 50,000 circuit boards each year in its production of stereo units. The cost of placing an order is $50. The cost of holding one unit of inventory for one year is $5. Currently, Q-Beck orders 2,500 circuit boards in each order.
1.Compute the annual ordering cost.
$
2.Compute the annual carrying cost.
$
3.Compute the cost of Q-Beck’s current inventory policy.
$
4.Compute the economic order quantity.
units
5.Compute the ordering cost and the carrying cost for the EOQ.
| Ordering cost | $ |
| Carrying cost | $ |
6.How much money does using the EOQ policy save the company over the policy of purchasing 2,500 circuit boards per order?
$
7.Conceptual Connection: Suppose that the supplier charges an extra $0.05 per unit to purchase circuit boards in orders of 1,500 or less. Should Q-Beck switch to the EOQ policy or not?
SelectYesNoItem 8