Medical Corporation of America sells a new type of body temperature thermometer. The company expects to sell 20,400 thermometers at a selling price of $80 per unit. The company maintains a safety stock of 1,400 units to eliminated stock-outs. The manager would like to cut costs as much as possible and decided to implement the EOQ inventory management system to minimize the total costs of inventory. Ordering cost is $120 per order and each unit costs $4 to carry. (PLEASE SHOW YOUR WORK).
a) What is the economic order quantity?
b) What is the amount of average inventory?
c) How many orders will be made per year?
d) What is the total cost of this inventory decision?