Due to the small size of the test lab, the facility does not have much space to store the text kits needed at an optimal order size of 182. The consulting agency feels the facility needs to reduce the optimal order size in half. This change would be much easier to store in the facility and this change will require more frequent deliveries from the supplier. For this reduced lot size to be optimal, the consulting agency will need to evaluate and reduce the ordering costs to support more frequent ordering. The consulting agency calculated the following costs from the past year s performance:

Unit Cost per Test Kit = $285

Average Monthly Test Kit use = 1120

Inventory Holding Costs per year as a faction of unit cost (capital, obsolescence, handling, occupancy, other) = 20%

Required

calculate how much should the ordering costs be?

Answer rating: 100% (QA)

solution Economic Order Quantity square root of 2Annual Usageorder costinve... View the full answer