Course Solutions Uncategorized (Answered) : A produce distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annua

(Answered) : A produce distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annua

June 27, 2024June 27, 2024| adminadmin| 0 Comment| 7:37 pm
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A produce distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 35 percent of the purchase price per crate. Ordering costs are $28. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying costs by using the EOQ?

Expert Answer

Monthly demand = 800 crates

Annual demand (D) = 800 x 12 months = 9600 crates

Ordering cost (S) = $28

Holding cost (H) = 35% of price = 35% of $10 = $3.5

Economic order quantity(Q*) = sqrt

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