Determining economic order quantity

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Reference no: EM13153279

Green Grass Incorporated is a distributor of golf balls. Garry's Golf Supplies is a local retail outlet which sells golf balls. Garry's purchases the golf balls from Green Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Green Grass Incorporated pays all incoming freight, and Garry's Golf Supplies does not inspect the balls due to Green Grass' reputation for high quality. Annual demand is 172,800 golf balls at a rate of 3,322 balls per week. Garry's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

Relevant ordering costs per purchase order $125.00

Carrying costs per carton per year:

Relevant insurance, materials handling,

breakage, etc., per year $ 0.77

What is the economic order quantity?

Purchasing at the EOQ recommended level, what are the relevant total costs?

Reference no: EM13153279

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