For certain item, the cost minimizing other quantity obtained with the basic EOQ model is 100 units, and the total annual inventory (holding and setup) cost is $300, what is the holding cost per year for this item? a. $1.50 b. $2.00 c. $3.00 d. $150.00 e. Not enough data to determine

Question

Yareli Patrick

Business

23 February, 07:41

For certain item, the cost minimizing other quantity obtained with the basic EOQ model is 100 units, and the total annual inventory (holding and setup) cost is $300, what is the holding cost per year for this item? a. $1.50 b. $2.00 c. $3.00 d. $150.00 e. Not enough data to determine

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Answers (1)

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Napoleon · Answer 1

c. $3.00

Explanation:

We know that

Average Holding cost = average inventory based on Economic order quantity * carrying cost per unit

$150 = 50 units * carrying cost per unit

So, the carrying cost would be $3

The computation is shown below:

The average carrying cost would be $300 : 2 = $150

And, the average inventory would be 100 units : 2 = 50 units