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Item Cost: $8.00 Order Cost: $287 Annual Holding Cost: 33% of item cost Annual Demand: 27,400...

Item Cost: $8.00

Order Cost: $287

Annual Holding Cost: 33% of item cost

Annual Demand: 27,400

Average Weekly Demand: 548

Std. Dev. of Weekly Demand: 20/week

Lead Time: 3 weeks

Service Probability: 99%

Previously found Info: Optimal order quantity = 2441 units. Reorder point = 1725 units. Annual Holding Cost: $3222.12. Annual Order Cost: $3221.55.

Assume a price break of $55 per order was offered for purchase quantities of 2,500 or more units per order. If you took advantage of this price break, how much would you save annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

business   Operations-Management   
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Answer #1

Economic Order Quantity is the number of unit that is added to the inventory which minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs.

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