el Activity #$2$: EOQ

Excel Online Activity: EOQ

The sales of a popular mouthwash at Merkle Pharmacies over the past $6$ months have averaged $2,000$ cases per month resulting in $24,000$ cases per month, which is the current order quantity. Merkle's cost is $$12\mathrm{.}00$ per case. The company estimates its cost of capital to be $14$ percent. Insurance, taxes, breakage, handling, and pilferage are estimated to be approximately $7$ percent of item cost. Thus, the annual inventory$-$holding costs are estimated to be $21$ percent of item cost. The cost of placing an order is estimated to be $$42\mathrm{.}00$ per order regardless of the quantity requested in the order. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

Questions

What is the minimum$-$cost economic order quantity? Round your answer to the nearest whole number.

$894$ cases

What is the annual ordering cost based on the minimum$-$cost economic order quantity? Use the rounded EOQ value in your calculations. Round your answer to the nearest cent.

$

What is the annual inventory holding cost based on the minimum$-$cost economic order quantity? Use the rounded EOQ value in your calculations. Round your answer to the nearest cent.

$ $126\mathrm{.}90$

What is the total annual cost based on the minimum$-$cost economic order quantity? Use the rounded EOQ value in your calculations. Round your answer to the nearest cent.

$

What are the total cost savings in absolute terms caused by using the minimum$-$cost economic order quantity instead of the current purchasing policy, of $Q=2,000?$ Use the rounded EOQ value in your calculations. Round your answer to the nearest cent.

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