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Calculate the economic order quantity

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JeeJam & Sons LLC expects an annual demand of 30,000 units, purchased for $6.00 from its supplier. There is currently no lead time for orders and each order will cost $170 regardless of quantity. The annual holding cost is estimated at $1.65 per unit. JeeJam & Sons LLC is able to get discounted prices based on the quanities purchased. A 1.5% discount is available on orders of at least 4,000 units and a 1.85% discount is available if the order quantity is 7,500 units or above.

Required: (a) Using the information provided by Charm Co, (i) Calculate the economic order quantity (EOQ) - ignoring the discount.

(ii) Determine whether higher quantities should be purchased to gain the discounts available.

(iii) Assuming Charm Co adopts the EOQ obtained in (i), and that it takes 2½ weeks for the order to be delivered, how frequently will the company place an order?

Reference no: EM132817987

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