Joe runs a mail-order business for gym equipment. Annual demand for the AbFlexers is 16,000. The annual holding cost per unit is $2.50 and the cost to place an order is $50. Joe can get bank credit if she needs it a 1% over prime. Although Joe does not want a lot of inventory the AbFlexers will not become obsolete.

Underlying Assumptions of Economic Order Quantity:
1. The ordering cost is constant.
2. The rate of demand is constant
3. The lead time is fixed
4. The purchase price of the item is constant i.e no discount is available
5. The replenishment is made instantaneously; the whole batch is delivered at once.

Calculate economic order quantity (EOQ) ?

Answer rating: 100% (QA)

Given Annual demand for AbFlexers 16000 units Ordering cost ... View the full answer