Rediken Company buys 500 boxes of Item X-100 every two months. Order costs are $380 per order;

Question:

Rediken Company buys 500 boxes of Item X-100 every two months. Order costs are $380 per order; carrying costs are $ 1 per unit and vary directly with inventory investment. Currently the company purchases the item for $5 each.
Required:
(1) Determine total ordering and carrying cost under current policy.
(2) Determine the and the related ordering and carrying costs.
(3) What is the optimal order size if the supplier offers a 5% discount for orders of 3,000 units?
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...