Economic order quantity; ordering and carrying costs. Similar to self-study problem.

LO₁Saxson Company predicts that it will use 25,000 units of material during the year. The expected daily usage is 200 units, and there is an expected lead time of five days and a safety stock of 500 units. The material is expected to cost $5 per unit. Saxson anticipates that it will cost $50 to place each order. The annual carrying cost is $0.10 per unit.

REQUIRED:

1. Compute the order point.

2. Determine the most economical order quantity by use of the formula.

3. Calculate the total cost of ordering and carrying at the EOQ point.