Rich Corporation’s annual carrying costs are 25 percent of the inventory value. The product cost is $85 a unit and they can replenish inventory instantaneously. The cost of placing an order is $55. If Rich Corporation plans to sell 5,000 units next year, what should be their economic order quantity?
A. 5,000 units.
B. 114 units.
C. 81 units.
D. 161 units.
Answer:D
Rich Corporation’s annual carrying costs are 25 percent of the inventory value. The product cost is $85 a unit and they can replenish inventory instantaneously. The cost of placing an order is $55. If Rich Corporation plans to sell 5,000 units next year, what should be their economic order quantity?
A. 5,000 units. B. 114 units. C. 81 units. D. 161 units.