Minty Airfresheners Ltd. maintains an inventory of bottles with chemical disinfectants to meet its annual demand for 84,200 bottles to service restrooms. Each package costs $4.88, and the order cost is $119.25 per order. Carrying costs have been identified as $1.63 per package. Minty Airfresheners bases its orders on the economic ordering quantity. Recently, the wholesaler of the bottles, in an attempt to shift the inventory burden to Minty Airfresheners, has offered a 15 percent discount if orders are placed quarterly.
hould the present ordering policy of Minty Airfresheners be changed? | |||||
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Answer: No
Explaination for the above answer is as under
We have been provided with the information as under
annual demand for 84,200 bottles
So A = 84200
Each package costs $4.88,
order cost is $119.25 per order.
O = 119.25
Carrying costs have been identified as $1.63
C =$ 1.63
Now we will find EOQ
EOQ =
EOQ =
Solving this equation we will get, EoQ =3514
So company should order inlot of 3514 and not quarterly