# Economic Order Quantity: Practice Exercise

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﻿Economic Order Quantity - PRACTICE EXERCISE SCM 300

Below are some the key figures important in your analysis:

Annual Per Unit Holding Costs are estimated at 30% of the wholesale cost.
D = 13000
H = \$60.00
C = \$200.00
S = \$400.00

Using Present Lot Size (Q = 1100)
Calculate the time between orders? Do Not Round.
4.40 weeks

How many orders per year are being placed annually? Do Not Round. 11.8 Orders per year

According to the information supplied, what is the present annual inventory cost? (In other words, using their present lot size what is the annual inventory cost?) Also, separately identify, the annual cost of purchasing the inventory, the annual holding cost (AHC) and annual ordering cost (AOC).

DC = \$ 2,600,000
AOC = \$ 4,727.27
AHC = \$ 33,000
TC = \$ 2,637,727.27

Using the Economic Order Quantity (Q=EOQ)
Calculate EOQ. (USE A WHOLE NUMBER, NO DECIMALS)
EOQ = 416

Using the calculated EOQ, How often will orders be placed? Weeks. DO NOT ROUND (Show 2 decimal places)

1.67 Weeks

According to the information supplied, what would be the annual inventory cost if they used the calculated EOQ? Also, separately identify the annual holding cost (AHC) and annual ordering cost (AOC). AHC = \$ 12,490

AOC = \$ 12,490
TC = \$ 2,624,980

If they could order the EOQ instead of 1100, how much would this one store stand to save annually?

\$12,747.28

Orders can only be taken in increments of 250 units. What would be the appropriate order size? A. 250 units
B. 500 units
C. 750 units
D. 1000 units