Delta Manufacturing Is Implementing an Economic Order Quantity (EOQ) Inventory

Short Answer

Delta Manufacturing is implementing an economic order quantity (EOQ) inventory control system and needs a good estimate of the cost to process a purchase order (PO). It takes 6 total labor hours to process a PO. The average number of SKUs on a PO is 4.2. The average wage for people working in the purchasing department is $20 per hour, plus employee benefits of $4 per hour. Fixed costs for the purchasing department are $350,000 per year assuming a 2,000 hour per employee per year workweek. Given this information, what is a good estimate of the cost to process one stock-keeping unit (SKU)?