Shields Carries a Part That Is Popular in the Manufacture

question 4

Essay

Shields carries a part that is popular in the manufacture of automatic sprayers. Demand for this part is 4,000 units per year; order costs amount to $30 per order, and holding costs total $1.50 per unit. The company is considering the implementation of an economic order quantity model in an effort to better manage its inventories.
Required:
A. Compute the economic order quantity.
B. Compute total annual inventory costs if Shields follows the EOQ policy.

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Definitions:

Pricing Decisions

The process of determining the selling price of goods or services, taking into account factors like cost, demand, and competition.

Revenue Considerations

Factors affecting the income generated from sales of goods or services in a business.

Profitability

The financial metric that measures the degree to which a company or business activity generates profit compared to its revenue or costs.

Pricing Decisions

The process businesses undertake to set prices for their products or services, taking into account costs, demand, competition, and profitability goals.