Each unit of an item costs a company $\pounds 40$ with annual holding costs of $18$ per cent of unit cost for interest charges, $1$ per cent for insurance, $2$ per cent allowance for obsolescence, $\pounds 2$ for building overheads, $\pounds 1\mathrm{.}50$ for damage and loss and $\pounds 4$ miscellaneous costs. If the annual demand for the item is constant at $1,000$ units and each order costs $\pounds 100$ to place, calculate the economic order quantity and the total cost of stocking the item. If the supplier will only deliver batches of $250$ units, how does this affect the costs?

Answer rating: 100% (QA)

The Economic Order Quantity EOQ is the number of units that a company should order to minimize its t... View the full answer