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Lady_Fox [76]
3 years ago
11

Your company imports decorative planters from Italy. Weekly demand is 1,500 units on average, with a standard deviation of 800.

Each planter costs you $10, and the holding cost per year is 25%. You are using a distribution center in Arizona, and fixed transportation costs from Italy is $10,000 per order. Consider a 52-week/year operations. What is the optimal order quantity
Business
1 answer:
butalik [34]3 years ago
3 0

Answer:

Optimal order quantity = 24,980(Approx)

Explanation:

Given:

Weekly demand = 1,500 units

Standard deviation = 800 units

Each planter cost = $10

Holding cost = 25%

Transportation cost = $10,000 per order

Total weeks = 52

Computation of optimal order quantity:

Optimal order quantity = \sqrt{\frac{2DS}{h}  }

Where, D = Weekly demand × Total weeks

D = 1,500 units × 52 = 78,000

S = $10,000

h = $10 × 25% = $2.5

Optimal order quantity = \sqrt{\frac{2(78,000)(10,000)}{2.5}  }

Optimal order quantity = 24,979.992

Optimal order quantity = 24,980(Approx)

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