Y. Dawne, Content Blogger, Diploma in Journalism, Amsterdam, Netherlands
Answered Feb 07, 2019
1,461. (2x20 x (4x20,00)/Co.06x25^0.5=1,461 Units. In marketing, carrying the cost of inventory or holding cost refers to the total cost of holding inventory, which includes cost such as rent expressed as a percentage of the cost of inventory. The economic order aggregate is the number of individual units that a company should add to items such as holding, order costs, and shortages. The EOQ is utilized as a portion of a continuous review inventory system where the inventory is surveiled at all times and a fixed quantity each time the inventory level reaches a specific reorder point. Some companies use an auto-replenishment system.
The purchase price of an inventory item is $25 per unit. In each three month period the usage of the item is 20,000 units. The annual holding costs associated with one unit equate to 6% of its purchase price. The cost of placing an order for the item is $20. What is the economic order quanity for the inventory item to the nearest whole unit?