Downey Disks is experiencing some inventory control problems. The manager currently orders four times each year with

Question:

Downey Disks is experiencing some inventory control problems. The manager currently orders four times each year with the annual purchase of the inventory costing $200,000. Each inventory item costs $5, ordering costs are $125 and each item costs $2.50 to carry. What is the opportunity cost of the present ordering system as compared to an EOQ ordering system?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...

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