A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its...1 answer below »

a company is using the economic order quantitative

A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its annual demand doubles, while the ordering cost per order and inventory holding cost per unit per year do not change. What will happen to the total annual variable cost? The annual variable cost includes the annual ordering cost and annual inventory holding cost? It doubles. It increases by 41.42%. remains the same. The impact depends upon the value of the ordering cost. It quadruples (increases by 400%). The annual demand for an item is 2400 units. The inventory holding cost is $ 6.00 per unit per year. The demand is continuous and constant, that is, 200 units/month. The item is purchased in two lots. The size of the first lot is 1600 units and the size of the second lot is

1 Approved Answer

ch k
answered on
September 07, 2020

5
Ratings,(16 Votes)

Option B (t increases by 41.42%) is the correct answer.

Explanation:

Let us Suppose:

Daily Demand = 200 Units

Setup Cost = $400

Holding Cost = $10 per unit

Days = 300 per year

Economic Order Quantity = (2*200*300*400/10)^1/2 = 2190.89 units

## 1 Approved Answer

September 07, 2020Option B (t increases by 41.42%) is the correct answer.

Explanation:

Let us Suppose:

Daily Demand = 200 Units

Setup Cost = $400

Holding Cost = $10 per unit

Days = 300 per year

Economic Order Quantity = (2*200*300*400/10)^1/2 = 2190.89 units

Total Cost = Ordering Cost + Holding Cost = (200*300)/2190.89 + 2190.89/2*20 =...

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