Discussion
Gosford Fruit & Vegetables orders most of its items in lot sizes of 15 units. Average annual demand per kilo of bananas is 900 units per year. Ordering costs are $34.15 per order with an average purchasing price of $150. Annual inventory carrying costing are estimated to be 40% of the unit cost.
Require:
a) Determine the economic order quantity.
b) Determine the annual cost savings if the shop change from an order size of 15 units to the economic order quantity.