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Best Choice is a retail business selling a fit-for-all mobile charger. The company is considering...

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Accounting

Best Choice is a retail business selling a fit-for-all mobile charger. The company is considering the EOQ model to make inventory decision for the mobile charger. Currently, it buys the product from the supplier at a cost of $50 per unit and 12,000 units is sold in a year. Apart from the unit purchase cost, the company also spend $200 on each purchase order to the supplier and its carrying cost per charger is $30, which incudes rent, insurance and cost of capital. The purchasing lead time is 5 days and business runs 365 days a year.

  1. Compute the EOQ

  2. Calculate the total relevant ordering costs at EOQ.

  3. Calculate the total relevant carrying costs at EOQ.

  4. What are annual relevant total costs at EOQ.

  5. How many purchase orders will be placed to the supplier in a year?

  6. Calculate the reorder point.

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