Determining average inventory, Finance Basics

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Determining average inventory

Question:

Diagnostic Supplies has expected sales of 135,000 units per year, a carrying cost of $3 per unit, and an ordering cost of $4 per order.

a. What is the economic order quantity?

b. What is average inventory? What is the total carrying cost?

c. Assume an additional 80 units of inventory will be required as safety stock. What will the new average inventory be? What will the new total carrying cost be?

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Finance Basics: Determining average inventory

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