Hammonds Corporation is trying to decide between two order plans for its inventory of a certain item. Irrespective of the plan, demand for the item is expected to be 1 000 units annually. Under plan A, order costs would be $40 per order and inventory holding costs (carrying cost) would be $100 per unit per annum. Under plan B, order costs would be $30 per order while holding costs would be 20% of the unit cost which is $480. 

Determine:

i. the economic order quantity for each plan. 

ii. total inventory cost for each plan. 

iii. which plan would be better for Hammonds

Answer rating: 100% (QA)

i The economic order quantity EOQ is the amount of inventory that min... View the full answer