Respuesta :
The annual saving amount by switching to their economic order quantity should be considered as the $15.
Calculation of the annual saving amount:
But before that following calculation need to be done.
The economic order quantity is
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
[tex]= \sqrt{\frac{2\times \text{480}\times \text{\$25}}{\text{\$15}}}[/tex]
= 40 units
Now the total cost is
= Annual ordering cost + Annual carrying cost
= Annual demand ÷ Economic order quantity × ordering cost per order + Economic order quantity ÷ 2 × carrying cost per unit
= 480 ÷ 40 × $25 + 40 ÷ 2 × $15
= $300 + $300
= $600
Now the total cost in case of 50 cases is
= Annual ordering cost + Annual carrying cost
= Annual demand ÷ Economic order quantity × ordering cost per order + Economic order quantity ÷ 2 × carrying cost per unit
= 480 ÷ 50× $25 + 50 ÷ 2 × $15
= $240 + $375
= $615
So, the annual saving cost is
= $615 - $600
= $15
Hence, The annual saving amount by switching to their economic order quantity should be considered as the $15.
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