Hardy Hospital Is Implementing the Economic Order Quantity (EOQ) Inventory

Multiple Choice

Hardy Hospital is implementing the economic order quantity (EOQ) inventory control system, and they need a good cost estimate to process a purchase order (PO) . It takes 4 total labor hours to process a PO. The average number of stock-keeping units (SKUs) on a PO is 4. The average wage for people working in the purchasing department is $22 per hour, plus employee benefits of $3 per hour. Fixed costs for the purchasing department are $300,000 per year assuming 2,000 hours per employee per year workweek. From the given information what is a good estimate of order cost (Co) to use in the EOQ model?

A) Less than $10
B) More than $10 but less than or equal to $20
C) More than $20 but less than or equal to $30
D) More than $30 but less than or equal to $40