Homework 6 Supply chain management calculation questions

Suppose you are the procurement manager for a pharmaceutical company and you are responsible for procuring the ingredients of a tablet that your company makes. One of the ingredients comes in totes and each tote cost $3,500. This ingredient has a fairly high holding cost because the strength of the ingredient seems to dissipate over time. Based on the production schedule for the next 12 months, you believe that you will need 180 totes. The order cost for a single order is $1,200 and the holding cost is 60% of its purchase price per year.

1. What is the Economic Order Quantity?
2. Given this EOQ, what is the average inventory on hand throughout the year?
3. How many times throughout the year should you place an order?