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a company purchases 5,000 units per quarter at an even rate throughout the year. Each order placed with the supplier incurs a delivery charge of $20. The annual cost of holding one unit is $5.
What is the minimum total of the inventory cost (order costs plus holding costs) per year?
working breakdown please with explanationHave you watched the free lecture on Inventory?
For the minimum total, you calculate the EOQ using the formula. In this case, D = 20,000; Co = $20; and Ch = $5.
When you have the EOQ then you can calculate the inventory costs in exactly the same way as in the free lecture.
(You ask for an explanation – there is a full explanation in the lecture, and I cannot type out the whole lecture here 🙂 )
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