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.


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