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In the second year, Fisk Corporation finds that it can reduce ordering costs to \(2 per order but that carrying costs stay the same at \)1.60 per unit. Also, volume remains at 49,000 units per year.

c. What will the average inventory be?

Short Answer

Expert verified

The average inventory will be 175 units.

Step by step solution

01

Relation between EOQ and average inventory

The economic order quantity helps in determining the amount of inventory ordered at a time and it moves from the EOQ level to zero and this number is divided by 2 to arrive at the average inventory.

02

Calculation of average inventory

The average inventory will be 175 units.

Averageinventory=EOQ2=3502=175units

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