Fisk corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. fisk anticipates sales of 84,500 units per year, an ordering cost of $4 per order, and carrying costs of $1.60 per unit. a. what is the economic ordering quantity? b. how many orders will be placed during the year? c. what will the average inventory be? d. what is the total cost of ordering and carrying inventory?

a. 650 units

b 130 units

c 325 units

d. $1,040

Explanation:

a. The computation of the economic order quantity is shown below:

=

=

= 650 units

b. The number of orders would be equal to

= Annual demand ÷ economic order quantity

= $84,500 ÷ 650 units

= 130 orders

c. The average inventory would equal to

= Economic order quantity ÷ 2

= 650 units ÷ 2

= 325 units

d. The total cost of ordering cost and carrying cost equals to

Ordering cost = Number of orders × ordering cost per order

                      = 130 orders × $4

                      = $520

Carrying cost = average inventory × carrying cost per unit

                      = 325 units × $1.60

                      = $520

So, the total would be

= $520 + $520

= $1,040

answer; ( prices are sticky);