You may attempt this question 2 more times for credit List A

You may attempt this question 2 more times for credit List AIA Inc. is looking to manage its cash position using the EOQ model. The company is consuming cash at the rate of $6100 per day, and is open for business 365 days in the year. Each time the frm sels seo n es to o tan the cash it o sts them S270. The interest rate is 260% What are the an al o der costs assocated with re EO otes Place your answer to the nearest dollar without including a dollar sign or commas

Solution

EOQ = SqRt[ 2 * Annual Requirement * Ordering cost / Storage cost per unit ]

= SqRt[ 2 * (6100 * 365) * 270 / 6100 * 2.60% ]

= SqRt[ 2 * 2226500 * 270 / 158.60 ]

= SqRt[7580769.23 ]

= $2753.32 per day

Annual Order costs = Annual Requirement * Ordering cost / EOQ = 2226500 * 270 / 2753.32 = $218340.90