Question

M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 ​units, and this is constant throughout the year. Carrying cost is estimated to be ​$0.50 per unit per​ year, and the ordering​ (setup) cost is ​$19 per order. ​a) To minimize​ cost, how many units should be ordered each time an order is​ placed? nothing units ​(round your response to two decimal​ places).

Answer 1

Answer:

The quanitity per order that minimizes the cost is 137.84 units.

Explanation:

The EOQ or economic order quantity is the quantity that should be ordered per order to minimize the cost of ordering and holding inventory. To calculate the number of units that should be ordered per order to minimize cost, we need to calculate the EOQ.

EOQ = √(2*D*O)/H

Where,

• D is the annual demand in units
• O is the ordering cost per order
• H is the holding/carrying cost per unit per annum

Thus,

EOQ = √(2 * 250 * 19)/0.5

EOQ = 137.84