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ADR Ltd purchases a particular items in lots of 1 250 units

Its annual usage of this item is 6 250

Question

ADR Ltd purchases a particular items in lots of 1 250 units. Its annual usage of this item is 6 250

units. Ordering costs are R 200 per order and the carrying (holding) costs are R10 per unit per year.

Calculate each of the following:

1.1.1 The Economic Order Quantity (EOQ) in units (6)

1.1.2 Number of orders (3)

1.1.3 Cost of orders (Order costs) (3)

1.1.4 Average Inventory held (3)

1.1.5 Cost of holding stock (3)

1.1.6 Total cost (2)

Financial Accounting

ADR Ltd purchases a particular items in lots of 1 250 units