Starr Co. predicts it will use 63,000 units of material during the year. The expected daily usage is 500 units, and there is an expected lead time of five days and a desired safety stock of 1,500 units. The material is expected to cost $5 per unit. Starr anticipates it will cost $194.95 to place each order. The annual carrying cost is $0.50 per unit.
1. Compute the order point.
2. Determine the most economical order quantity by use of the formula (round to the nearest whole unit).
3. Calculate the total cost of ordering and carrying at the EOQ point.