# Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 2,400 of item X, which costs \$25 each. Storage costs, which include insurance and cost of capital, amount to \$4 per unit of average inventory. Every time an order is placed for more item X, it costs \$18. Calculate the order quantity and the annual ordering cost for item X.

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Item X is a standard item stocked in a company's inventory of component parts. Each year the firm, on a random basis, uses about 2,400 of item X, which costs \$25 each. Storage costs, which include insurance and cost of capital, amount to \$4 per unit of average inventory. Every time an order is placed for more item X, it costs \$18. Calculate the order quantity and the annual ordering cost for item X.

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Step 1

Annual demand (D) = 2400 items

item cost = \$25

Storage cost (H) = \$4 per unit

Ordering cost (S) = \$18

Hence the economic order quantity ...

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