Answer:
a. 1186
b. $1,576.73
c. $2.66
d. $419,578.96
e. $623,33
f. $389,298.33
Explanation:
a) What is the EOQ for the current supplier?
EOQ = √(2×Annual Demand×Ordering Cost) / Holding Cost per unit
= √(2×22,000×$85) / $19 × 14%
= 1186
b) What is the annual ordering cost for the current supplier
annual ordering cost = Total demand / EOQ × Cost per order
= 22,000/1186 × $85
= $1,576.73
c) What is the holding cost per unit per year for the current supplier?
holding cost per unit = $19 × 14%
= $2.66
d) What is the total annual inventory cost (including purchase cost) for the current supplier
total annual inventory cost = Purchase Cost + Ordering Cost + Carrying Cost
= 22,000×$19 + $1,576.73 + (1186/2) × $2.66
= $419,578.96
e) What is the annual holding cost for the new supplier (when purchasing 3,000 each order)
annual ordering cost = Total demand / EOQ × Cost per order
= 22,000/3,000 × $85
= $623,33
f) What is the total annual inventory cost (including purchase cost) for the new supplier (when purchasing 3,000 each order)?
total annual inventory cost = Purchase Cost + Ordering Cost + Carrying Cost
= 22,000×$17.50 + $623,33 + (3,000/2) × ($17.50 × 14%)
= $389,298.33
