LESSON #10: INVENTORY MANAGEMENT HOMEWORK

EOQ & OPR

(2) Owen-King Company sells optical equipment. Lens Company manufactures special glass lenses. Owen-King Company orders 5,200 lenses per year at $20 per lens. Owen-King Company has a 30% hurdle rate. The following data are available:

Relevant ordering costs $21.25/ per purchase order

Relevant carrying cost--insurance, handling, breakage,

etc., per year (Do not forget to include opportunity cost) $2.50/unit

Required:

the economic order quantity (i.e., the number of units that should be

bought per purchase order)? answer: 161. lens

2. What is the total carrying cost?

3. What is the total ordering cost?

4. What is the total annual cost at the EOQ?