Calculate annual ordering costs for each alternative

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Reference no: EM132688399

Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:

Average demand = 20 units per day

Average lead time = 30 days

Item unit cost = $50 for orders of less than 200 units

Item unit cost = $48 for orders of 200 units or more

Ordering cost = $25

Inventory carrying cost = 25%

The business year is 250 days

Assume there is no uncertainty at all about the demand or the lead time.

Question a. Calculate EOQ if unit cost is $50 and $48. (Note: These EOQs do not need to be feasible in their price range.) (Round up your answers to the next whole number.)

Question b. Calculate annual ordering costs for each alternative? (Round your answers to 2 decimal places.)

Reference no: EM132688399

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