A Service Garage Uses 120 Boxes of Cleaning Cloths a Year

question 155

Essay

A service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an annual basis.
Determine:
(A) the economic order quantity
(B) the total cost of carrying the cloths (excluding purchase price)
(C) the average inventory
D = 120 boxes per year
S = $3
H = .10($6) = $.60 per box-year

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Definitions:

Excess Demand

A situation where the quantity demanded of a product or service exceeds the quantity supplied at a given price.

Quantity Demanded

The amount of a good or service that buyers are willing and able to purchase at a specific price, holding all other factors constant.

Supply Pizza

Represents the total quantities of pizza that sellers are willing and able to provide at various prices within a given market.

Excess Supply

Excess supply, also known as surplus, occurs when the quantity of a good or service offered for sale exceeds the quantity demanded at the current price.