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What is the amount of average inventory

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Reference no: EM132758551

Milling Corp. has developed a new type of product. The local distributor of the product expects to increase her sales by 20% over the past year due to this recent development.

Last year's sales amounted to $50,000 at a selling price of $100 per unit. Meanwhile, a safety stock of 23 units has eliminated stockouts. The manager of the corporation would like to cut costs as much as possible and comes to you for a financial advice.

Warehouse Space - $2.50 per unit

Material Handling Expense - $1.50 per unit

Insurance Premium - $1.00 per unit

Total Ordering Cost - $100 per order

1. Compute the Economic Order Quantity (EOQ).

2. What is the amount of average inventory?

3. How many orders will be made per year?

4.A. What is the total ordering cost of this inventory decision?

4.B. What is the total carrying cost of this inventory decision?

Reference no: EM132758551

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