Name _______________________________

Economic Order Quantity

A company purchases a part which is a component of one of the assemblies it manufactures. This component is used at a uniform rate, totaling 25,000 units per year. The company has ascertained the following costs: $14.00 to place and receive each order, and an inventory carrying cost equal to 20% of the unit purchase price. No minimum amount of inventory is required.

The units are available at the following prices:

a) $1.00 each for lot sizes of 1 to 1,999 units

b) $0.50 each for lot sizes of 2,000 to 4,999

c) $0.30 each for lot sizes of 5000 or more

Determine the economic order quantity (Q) for each price:

a) ______________________________

b) ______________________________

c) ______________________________

Determine the total annual costs for the inventory for each economic order quantity, including the purchase price + ordering costs + carrying costs:

a) ______________________________

b) ______________________________

c) ______________________________

Name and answers only on this side.