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Economic order quantity/average invetory/carry cost
Asked Apr 9, 2008, 03:52 PM
Diagnostic Supplies has expected sales of 135, 000 units per year, carrying cost of $3 per unit, and an ordering cost of $4 per order.
a) what is the economic order quantity?
b) what is average inventory? What is the total carrying cost?
c) Assume an additional 80 units of inventory will be required as safety stock. What will the new average inventory be? What will the new total carrying cost be?
SO FAR I HAVE FIGURE THAT THE EQUATION YOU NEED TO USE IS
S= TOTAL SALES IN UNITS
O = ORDERING COST FOR EACH ORDER
C= CARRYING COST PER UNIT IN DOLLARS
SO HERE GOES WHAT I HAVE SO FAR
a) 135X135,000X$4.00 72,900 = 24,300 squared = 4,929,503 units
b) 4,929,503,+50(not sure what safety stock is)
SO THIS IS WHERE I AM STUCK.
CAN ANYONE HELP?? :confused: