Howe Corporation is trying to improve its inventory control system and has installed an on-line computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of $4 per order, and carrying costs of $1.008 per unit a. What is the economic ordering quantity? b. How many orders will be placed during the year? c. What will the average inventory be? d. What is the total cost of inventory expected to be Solution: Howe co 2SO2×126,000×$4 a. EOQ= 1. 000 units $l.008 b. 126000 units/1.000 units=126 orders C. EOQ/2=1,000/2=500 units(average inventory) d. 126 orders x $4 ordering cost $504 500 units x $1.008 carrying cost per unit 504 Total costs =$1,008 CopyrightC 2005 by The McGray-Hill Companies, Inc. -254Copyright © 2005 by The McGraw-Hill Companies, Inc. S-254 7-12. Howe Corporation is trying to improve its inventory control system and has installed an on-line computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of $4 per order, and carrying costs of $1.008 per unit. a. What is the economic ordering quantity? b. How many orders will be placed during the year? c. What will the average inventory be? d. What is the total cost of inventory expected to be? Solution: Howe Corp. 1,000 units $1.008 2 126,000 $4 C 2SO a. EOQ =   = = b. 126,000 units/1,000 units = 126 orders c. EOQ/2 = 1,000/2 = 500 units (average inventory) d. 126 orders x $4 ordering cost = $ 504 500 units x $1.008 carrying cost per unit = 504 Total costs = $1,008