The Milling Corp A) What Is the Economic Order Quantity?
B) What Is

question 104

Essay

The Milling Corp. has developed a new type of widget. The local distributor expects to increase his sales by 25% over the past year due to this new development. Last year's sales were $150,000 at a selling price of $100 per unit. A safety stock of 35 units has eliminated stockouts. The manager would like to cut costs as much as possible, so he has come to you for advice. $\begin{array} { l l } \text { Warehouse space } & \$ 2.50 / \text { unit } \\\text { Material Handling Expense } & \$ 1.50 / \text { unit } \\\text { Insurance Premium } & \$ 1.00 / \text { unit } \\\text { Total ordering cost } & \$ 100.00 / \text { per order }\end{array}$ 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?

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Definitions:

Organization

A structured group of individuals working together to achieve common goals or objectives, often characterized by a set hierarchy or operating system.

Maslow

Abraham Maslow was an American psychologist best known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization.

Herzberg

Related to Frederick Herzberg's Motivation-Hygiene Theory, which suggests that job satisfaction and dissatisfaction stem from different factors.

McGregor

Refers to Douglas McGregor's Theory X and Theory Y, which describe two contrasting models of workforce motivation and management.