The Milling Corp. has developed a new type of widget. The local distributor expects to increase his sales by 20% over the past year due to this new development. Last year's sales were $50,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes: $$\begin{array} { l l }
\text { Warehouse space } & \$ 2.50 \text { unit } \
\text { Material handling expense } & \$ 1.50 / \text { unit } \
\text { Insurance premium } & \$ 1.00 / \text { unit } \
\text { Total ordering cost } & \$ 100.00 \text { per order }
\end{array}$$ A) What is the economic order quantity?
B) What is the amount of average inventory?
C) How many orders will be made per year?
D) What is the total cost of this inventory decision?

Question

The Milling Corp. has developed a new type of widget. The local distributor expects to increase his sales by 20% over the past year due to this new development. Last year's sales were $50,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes: $$\begin{array} { l l } 
\text { Warehouse space } & \$ 2.50 \text { unit } \
\text { Material handling expense } & \$ 1.50 / \text { unit } \
\text { Insurance premium } & \$ 1.00 / \text { unit } \
\text { Total ordering cost } & \$ 100.00 \text { per order }
\end{array}$$ A) What is the economic order quantity?
B) What is the amount of average inventory?
C) How many orders will be made per year?
D) What is the total cost of this inventory decision?

Quizplus · Accepted Answer

The Answer of The Milling Corp. has developed a new type of widget. The local distributor expects to increase his sales by 20% over the past year due to this new development. Last year's sales were $50,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes: $$\begin{array} { l l } 
\text { Warehouse space } & \$ 2.50 \text { unit } \
\text { Material handling expense } & \$ 1.50 / \text { unit } \
\text { Insurance premium } & \$ 1.00 / \text { unit } \
\text { Total ordering cost } & \$ 100.00 \text { per order }
\end{array}$$ A) What is the economic order quantity?
B) What is the amount of average inventory?
C) How many orders will be made per year?
D) What is the total cost of this inventory decision?

The Milling Corp A) What Is the Economic Order Quantity? B) What Is

The Milling Corp A) What Is the Economic Order Quantity?
B) What Is