Mynah Fitzgibbon, of L.A. Plumbing, uses 1,200 of a certain spare part that costs $25 for each

Question:

Mynah Fitzgibbon, of L.A. Plumbing, uses 1,200 of a certain spare part that costs $25 for each order, with an annual holding cost of $24.

(a) Calculate the total cost for order sizes of 25, 40, 50, 60, and 100.

(b) Identify the economic order quantity and consider the implications for making an error in calculating economic order quantity.

Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...