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Academic MBA Question:

Q: An auto parts supplier sells branded batteries to the auto mechanics. The annual demand is approximately 3,600 batteries. The supplier pays $28 for each battery and estimates that the annual holding cost is 25% of the battery’s value. It costs approximately $20 to place an order (ordering cost). The supplier currently orders 300 batteries per month.

  • a. Determine the ordering, holding, and total inventory costs for the current order quantity.
  • b. Determine the economic order quantity (EOQ).
  • c. How many orders should be placed per year using the EOQ? d. Determine the ordering, holding, and total inventory costs for the EOQ.

 

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