Bandana Corp. uses 2,400 units of a product per year on a continuous basis. The carrying costs of the product are $60 per year and the ordering cost is $250 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory.
1. What is the Economic Order Quantity (EOQ)?
2. How many orders are made every year? (using 365 days)?
3. Calculate the total ordering cost per year.
4. How many is the average inventory?
5. Calculate the total carrying cost per year.