The following inventory data have been established for the Thompson Company:
(1) Orders must be placed in multiples of 100 units.
(2) Annual sales are 338,000 units.
(3) The purchase price per unit is $6.
(4) Carrying cost is 20 percent of the purchase price of goods.
(5) Fixed order cost is $48.
(6) Three days are required for delivery.
a. What is the EOQ?
b. How many orders should Thompson place each year?
c. At what inventory level should an order be made?
d. Calculate the total cost of ordering and carrying inventories if the order quantity is
(1) 4,000 units,
(2) 4,800 units, or
(3) 6,000 units.
(4) What are the total costs if the order quantity is the EOQ?