Answer:
= $367.34
Explanation:
<em>Economic order quantity (EOQ)</em><em> is the order quantity that minimizes the balance of holding cost and ordering cost. At the EOQ, the holding costs are equal to the ordering costs.</em>
<em />
EOQ = (2× Co× D)/Ch
Total relevant cost of inventory = ordering cost + Holding cost
Step 1
<em>Total cost of inventory under EOQ </em>
EOQ for Wood County
EOQ = 2√(2× 15 × 1000× 52)/(15%× 35)
= 545.10 units
<em>ordering cost =( (1000× 52)/ 545.10 ) × 15 = 1,430.90</em>
<em>Holding cost = ( 545.10/ 2) × 15% × 35 =1,430.90</em>
Total cost =1430.90 + 1430.90= $2,861.81
Step 2
<em>Total cost of inventory using order size of 900 boxes</em>
<em>ordering cost =( (1000× 52)/900 ) × 15 = 866.66</em>
<em>Holding cost = (900/ 2) × 15% × 35 = 2,362.5</em>
Total cost = <em>866.66 + 2,362.5 =</em> $3,229.16
Step 3
<em>Calculate in savings in total costs</em>
<em>Savings = Difference in total inventory cost of EOQ order size and 900 boxes order size :</em>
=$3,229.16-$2,861.81
= $367.34
Savings = $367.34
