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Assume you’re recommending your company establish an EOQ for a Make-to-Stock inventoried frozen food item. The annual demand for the item is 14,000 units. Each unit costs $9. The ordering cost are $35 per order. The inventory carrying costs are 20%.
a. What should be the Economic Order Quantity in whole units?
b. What is the Annual Cost of Ordering (round up or down to the nearest dollar)?
c. What is the Annual Cost of Carrying Inventory (round up or down to the nearest dollar)?
d. In parts b. and c., what is your explanation as to why the Order Cost and Carry Cost are the same (if they’re the same), or are different (if they’re different)?
e. If the item becomes a make-to-order item, what Period Order Quantity would you recommend in whole weeks (assuming 50 weeks per year)?
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