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Compute the economic order quantity

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Reference no: EM132976756

Question - MAGIGINGMAGALING AKO Company is a wholesaler. It purchases 60,000 units of Product X per month for sale to retailers. The cost of placing an order is P100. The cost of holding one unit of inventory for one year is P4.

REQUIRED -

1. Compute the economic order quantity.

2. How many orders would MAGIGINGMAGALING AKO Co. place under the EOQ policy?

3. Compute the annual ordering cost for the EOQ.

4. Compute the annual carrying cost for the EOQ.

5. Compute the total inventory-related cost at the EOQ.

6. Previously, MAGIGINGMAGALING AKO Co. had been purchasing 5,000 units of product X per order:

i. What is the ordering cost per year under the previous policy?

ii. The annual carrying cost?

iii. How much money does the company save over the policy of purchasing 5,000 units per order using the EOQ policy?

Reference no: EM132976756

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