Question

A large hospital has an annual demand for 70.000 booklets on healthy eating. It cost ​$.75 to store one booklet for a​ year, and it costs ​$80 to place an order for a new batch of booklets. Find the optimum number of copies per order.

Answer 1

Answer:

It will order 3,865 booklets

Explanation:

We need to use the formula for Economic Optimal Quantity

$Q_{opt} = \sqrt{\frac{2DS}{H}}$

Where:

D = annual demand

S= supply cost = ordering cost

H= Holding Cost

$Q_{opt} = \sqrt{\frac{2*70,000*80}{.75}}$

$Q_{opt} =3,864.37$

It will order 3,865 booklets

How to Remember:

Demand per year and order cost goes in the dividend.

Holding cost goes in the divisor.