Toyota company manufactures some of its product lines from raw materials and for other prod. assembles purchased parts.
For One product 10,000 sub assemble parts at $ 100 each are Purchased annually. The order and receiving cost is $ 200 and the carrying cost is 25%.
This is only one of many inventory items the firm must carry and a capital rationing decision has be made to spend only $ 10000 at a time on these subassemblies. Units must be order in multiples of 100.
1. Computatyion of the EOQ.
2. The Opportunity loss expressed as carrying cost by changing the EOQ and Inventory level to the availability of capital.