Bishop Manufacturing Is Implementing an Economic Order Quality (EOQ) Inventory

Essay

Bishop Manufacturing is implementing an economic order quality (EOQ) inventory control system and needs a good estimate of the cost to process a purchase order (PO).It takes 5 total labor hours to process a PO.The average number of SKUs on a PO is 2.2.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 $250,000 per year assuming a 2,000 hour per employee per year work week.Given this information a good estimate of the cost to process one purchase order is