Problem:
Redan Manufacturing uses 3,000 switch assemblies per week and then reorders another 3,000. The relevant carrying cost per switch assembly is $12.50, and the fixed order cost is $1,500.
Required:
Question 1: What is the current carrying cost?
Question 2: What is the order cost?
Question 3: Calculate the economic order quantity?
Note: Provide support for your underlying principle.