# XYZ company sells pumps. The demand for pumps is constant, and equal to 1000 + 837 = 1837 per year. Each pump costs $40, and the inventory carrying charge is 25% per year. Cost of placing an order is $45 per order.

XYZ company sells pumps. The demand for pumps is constant, and equal to 1000 + 837 = 1837 per year. Each pump costs $40, and the inventory carrying charge is 25% per year. Cost of placing an order is $45 per order. How many pumps should be ordered at a time? What is the total annual cost? Suppose that your boss is allergic to mathematical equations, and you would like to determine the best order quantity using an excel spreadsheet. (hint: set up a table in which you determine total annual cost for various order quantities – starting at 10 and in increments of 10 – 10, 20 30, 40…. For each order quantity, determine the annual cost of purchase, annual cost of orders, annual inventory cost and the annual total cost. Choose the order quantity that results in the lowest total annual cost.)