Athletic Sports Store sells tennis rackets. The store orders the rackets from a supplier at a cost of $250 per order. The store estimates that the annual carrying cost is 25% of the purchase price, which is $40 per unit per year. The store annual demand is estimated to be 20,000 rackets. What is the EOQ, the total number of orders required during the year, and the total annual cost?

The computations are shown below:

Explanation:

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

= 1,000 units

The carrying cost is

= $40 × 25%

= $10

b. The number of orders would be equal to

= Annual demand ÷ economic order quantity

= $20,000 ÷ 1,000 units

= 20 orders

The average inventory would equal to

= Economic order quantity ÷ 2

= 1,000 units ÷ 2

= 500  units

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

Ordering cost = Number of orders × ordering cost per order

= 20 orders × $250

= $5,000

Carrying cost = average inventory × carrying cost per unit

= 500 units × $10

= $5,000

So, the total would be  

= $5,000 + $5,000

= $10,000

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know