Question:
Michael Traci, the very new inventory manager at Magyar Gold Supplies, is considering using the economic order quantity for controlling inventory. He wants you to apply the EOQ to a sample product, the Super-Z wedge. The Super-Z Wedge has an average demand of 30 units/period with an ordering cost of $30/order. The cost of carrying a Super-Z Wedge in inventory is $2.00/unit/period. No safety stock is carried for this item.
a. Calculate the economic order quantity.
b. Calculate the average cycle stock for this item using the order quantity in question a.
c. Assuming there are 12 periods per year, calculate total cost per year.