EOQ, Ordering Cost, Carrying Cost, and Total Inventory-Related Cost

Ranger Company purchases 19,230 units of Product Beta each year in lots of 864 units per order. The cost of placing one order is $14, and the cost of carrying one unit of product in inventory for a year is $7.

Required:

If required, round your answers to nearest whole value.

1. What is the EOQ for Beta? ______ units

2. How many orders for Beta will Ranger place per year under the EOQ policy? ______ orders per year

3. What is the total ordering cost of Beta for a year under the EOQ policy? $

4. What is the total carrying cost of Beta per year under the EOQ policy? $

5. What is the total cost of Ranger's inventory policy for Beta per year under the EOQ policy? $

Here are some hints provided:

2. Divide annual number of units by number of units in EOQ order.

3. Multiply number of orders by cost per order.

4. Multiply the average number of units in EOQ order by the cost of carrying one unit in inventory.

5. Add total ordering cost and total carrying cost.