Working with the Economic Order Quantity (EOQ)
Demand for the Executive DeskPro Computer at Buy More is 1,000 units per month. Buy More incurs a fixed order placement, transportation, and receiving costs of $4,000 each time an order is placed. Each computer costs Buy More $500, and the retailer has a holding cost of 20%.
Evaluate the number of computers the store manager should order in each replenishment lot.
What would the EOQ model recommend if an inventory item has a high usage rate and is expensive?