Answer:
It waster $74,941.2 per year
Explanation:
<u>The procedure is as follow:</u>
- We calcualte the Economic order Quantity
- Then we calculatethe cost for EOQ and current order size
- compare to know the loss for inefficiency in inventory
1.- EOQ
D = annual demand 230 units x 12 month = 2,760
S= setup cost = ordering cost = 38
H= Holding Cost= 10% of unit cost 39.60
EOQ = 72.78028371 = 73
<u>2.- Calculate Cost:</u>
<u>EOQ cost: </u>
orders 2,760 / 73 = 37.80 = 38 order x $38 each = $1,444
holding cost: 73 x 39.6 = $2,890.8
Total: 1,444 + 2,890.8 = 4,334.8
<u>Current Cost:</u>
orders: 2,760 / 2,000 = 1.* = 2 order per year x $38 each = $76
holding cost: 2,000 x 39.6 = 79.200
Total 79,200 + 76 = 79,276
<u>3.- Difference:</u>
79,276 - 4,334.8 = 74,941.2