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Find what would be the economic order quantity

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ABC Motor Company uses 4,500 units of Part s-10 each year. The cost of placing one order for part S-10 is estimated to be about P20. Other costs associated with carrying Part S-10 in inventory are:

Annual                           Cost Per Year

Insurance............................................. P0.20

Property Taxes....................................... 0.09

Interest on funds invested.......................... 0.15

Other................................................... 0.06

Total Cost.................................... P0.50

Question 1: Assume that the company has been able to reduce the cost of placing an order to only P1.00. Also assume that when the waste and inefficiency caused by inventories is considered, the cost to carry an inventory jumps to P1.60 per unit. Under these conditions, what would be the Economic Order Quantity?

Reference no: EM132577317

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