Exercise EOQ

A company is looking at its inventory control policy. Currently it uses an order quantity of 500 items. The cost of placing an order is $17.00. The cost of holding one item of inventory for one year is $4.00. Demand is a constant 272 items per week (assume a 50-week year).

Required:

Calculate annual inventory costs with the current ordering policy.

Calculate the economic order quantity.

How much would the company save each year by implementing the EOQ policy?

What would be the frequency of placing orders with:

the existing policy

the EOQ policy?