Exam 12: Managing Inventory

Holding costs are $35 per unit per year,the ordering cost is $120 per order,and sales are relatively constant at 300 per month.(a)What is the optimal order quantity? (b)What are the annual holding and setup costs?

Central University uses $123,000 of a particular toner cartridge for laser printers in the student computer labs each year.The purchasing director of the university estimates the ordering cost at $45 and thinks that the university can hold this type of inventory at an annual storage cost of 22% of the purchase price.How many months' supply should the purchasing director order at one time to minimize the total annual cost of purchasing and carrying?

Which of the following statements about the basic EOQ model is TRUE?