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A company purchases 5000 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 in inventory is $5.What is the minimum total of the inventory costs(order costs plus holding costs) per year. Could you please help me to calculate the minimum total of the inentory. Thank you for your help
You need to calculate the EOQ using the formula (D is the demand per year, so is 20,000 units).
The average inventory is the EOQ/2 and the number of orders per year is D/EOQ.You should watch the free lectures on Inventory Control.
(In future if you want me to help then you should ask in the Ask the Tutor Forum – this forum is for students to help each other)
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