Folsom River products is contemplating the use of economic order quantity analysis to optimize inventory ordering activities and minimize inventory cost. Below are data for three products the company sells. product RS2 PM3 SNZ Annual demand in units 24, 500 16,000 5,000 Cost per unit $50 $20 $10 Cost to place an order $100 $60 $40 carrying cost as a percent of product cost 20% 10% 16% Required: a) Compute Economic order quantity b) Determine the number of orders placed annualy for each of the product c) Compute the total annual inventory ordering costs for the three products combined.
Folsom River products is contemplating the use of economic order quantity analysis to optimize inventory ordering activities and minimize inventory cost. Below are data for three products the company sells.
product
RS2 PM3 SNZ
Annual demand in units 24, 500 16,000 5,000
Cost per unit $50 $20 $10
Cost to place an order $100 $60 $40
carrying cost as a percent
of product cost 20% 10% 16%
Required:
a) Compute Economic order quantity
b) Determine the number of orders placed annualy for each of the product
c) Compute the total annual inventory ordering costs for the three products combined.
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