(Answered) Discussiongosford fruit amp vegetables orders most of its

Accounting

Discussion

Gosford Fruit & Vegetables orders most of its items in lot sizes of 15 units. Average annual demand per kilo of bananas is 900 units per year. Ordering costs are $34.15 per order with an average purchasing price of $150. Annual inventory carrying costing are estimated to be 40% of the unit cost.

Require:

a) Determine the economic order quantity.

b) Determine the annual cost savings if the shop change from an order size of 15 units to the economic order quantity.

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