Each year, Y Company purchases 20,000 units of an item that costs $640 per unit. The cost of placing an order is P 480, and the cost to hold the item in inventory for one year is $150. Determine the EOQ. What is the average inventory level, assuming that the minimum inventory level is zero Determine the total annual ordering cost and the total annual holding cost for the item if the EOQ is used.

Question

Each year, Y Company purchases 20,000 units of an item that costs $640 per unit. The cost of placing an order is P 480, and the cost to hold the item in inventory for one year is $150.

  1. Determine the EOQ.
  2. What is the average inventory level, assuming that the minimum inventory level is zero
  3. Determine the total annual ordering cost and the total annual holding cost for the item if the EOQ is used.

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