Posted: December 28th, 2015
The following information relates to one of the materials used by ABC Ltd.
Material usage per annum = 20 000 units Purchase price = $16 per unit !
Storage (or carrying) cost per annum = 25% of purchase price Cost per order = $25 Safety stock = 1 000 units Calculate: (i) the economic order quantity (ii) the average stock (or inventory) (iii) cost savings effected when ordering in economic order quantity rather than in lots of 2 000 units.
Place an order in 3 easy steps. Takes less than 5 mins.