Each year, the Super Fresh Grocery Store purchases 25,000 units of an item that costs $40 per unit. The cost of placing an order is $80 and the cost to hold the item for one year is 10 percent of the unit cost.
Number of working days per year = 250 days.
a(4). Determine the economic order quantity for the item.
b(3). What is the average inventory level?
c(3). What is the time (in working days) between orders?
d(4). What is the total annual ordering and carrying cost?
e(6). What is the effect on EOQ and the total annual ordering and carrying cost if next year the Super Fresh Grocery Store purchases additional (extra) 5000 units and the ordering cost is reduced from $80 to $24 per order?