Answer:
EOQ = 609.91 units
Average inventory= 600 units
Number of orders = 5.2 times
Annual inventory holding cost =$1,200
Annual ordering cost = $312
Total cost = $88,312
Explanation:
EOQ =√ (2× Co× D)/Ch
EOQ= ? , Co-60, Ch- 2, D- 6200
EOQ = √(2× 60× 6200/2)
EOQ = 609.9180273
Average inventory = minimum level +EOQ/2
= 1200
/2 = 600 units
Number of orders = Annual demand/ order quantity
= 6,200/1200 = 5.166
Number of orders = 5.2 times
Annual inventory holding cost = Average inventory × holding cost per unit
=600
× $2 =$1,200
Annual ordering cost = No of orders × ordering cost per order
= 5.2 times × 2 =$312
Annual inventory cost = Purchase cost + Ordering cost + Holding cost
Purchase cost=Annual demand× unit price 14× 6200= 86,800
Total cost = 86,800 + $1,200+ $312
=88312
