​Brett's Gift Box estimates that it will sell​ 30,000 porcelain figurines next year. Because porcelain figurines are so easily​ damaged, the average per unit carrying cost of the figurines is​ $25. The per order cost of ordering is​ $800. Assume that Brett wants a safety stock of 75 figurines. If Brett reorders the figurines based on the economic order​ quantity, what is​ Brett's average inventory of porcelain​ figurines?

If Brett reorders the figurines based on the economic order​ quantity, Brett's average inventory of porcelain​ figurines is 768 units.

The economic order quantity is computed as the square root of (2 x Annual Sales Unit (Demand) x Ordering Cost)/Carrying Cost

= square root of (2 x 30,000 x $800)/$25

= square root of 1,920,000

= 1,386 units

Average inventory = (Economic Order Quantity)/2 + Safety stock

= 1,386/2 + 75

= 693 + 75

= 768 units

Thus, Brett's Gift Box average inventory of porcelain figurines is 768.

Learn how to calculate average inventory and the use of economic order quantity here: and respectively.

Data:

Estimate sales units for next year = 30,000 porcelain figurines

Average per-unit carrying cost = $25

Per-order Ordering Cost = $800

Required safety stock = 75 figurines

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