Friendly Home Services expects sales of baskets to be $125,000 this year, an ordering cost of $75 per order, and carrying costs of $3.00 per basket. The price of a basket is $25. Show the formula and your work.

Question 3 a) What is the economic order quantity?

Question 3b) How many orders will be placed during the year?

Question 3 c) What will the average inventory be?

Question 3d) What is the total cost of ordering and carrying inventory?

General Questions on EOQ

Question 3e) Precisely what does the EOQ formula tell us? What assumption is made about the usage rate for Inventory?