FRA Manufacturing Company purchases 9,000 units of Part 3BX each year. The cost of placing an order

Question:

FRA Manufacturing Company purchases 9,000 units of Part 3BX each year. The cost of placing an order is $5 and the cost of carrying one part in inventory for a year is $1. What is the economic order quantity (EOQ) for part 3BX if the company carries a safety stock of 200 units? How many orders will the company need to place each year?

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...

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