Question

Homework: Homework 8 (Module 12) Score: 0 of 3 pts 20 of 21 (21 complete) HW Score: 83.5%, 37. X Problem 12.9 Question Henry Crouch's law office has traditionally ordered ink refills 55 units at a time. The firm estimates that carrying cost is 40% of the $11 unit cost and that annuald about 240 units per year. The assumptions of the basic EQ model are thought to apply. For what value of ordering cost would its action be optimal? a) For what value of ordering cost would its action be optimal? Its action would be optimal given an ordering cost ors per order (round your response to two decimal places). Enter your answer in the answer box and then click Check Answer. 1 part remaining Clear All Check Answer Type here to search o RI 211 7/29/20 DOLL F3 F4 Fio FO F7 A

Answer 1

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs or Carrying Cost, and order costs

As the information provided

Optimal Quantity (EOQ) is 55 Units (As given EOQ assumption is applied

Carrying Cost =40% of $11 =H =$4.4 per year per unit

Ordering Cost =S=?

Annual Demand =D= 240 unit per year

The Fomulae for economic order quantity = √2DS÷H

55=√(2×240×S)÷4.4

Solving above equation by squaring both the side

55²=(√2×240×S÷4.4

3025=(2×240×S)÷4.4

480S=13310

S=27.73

Hence The optimal given as ordering cost is $27.73 per order