You just won $70,000 on a scratch-off lottery ticket. You plan to save the money in a retirement account expected to return 8% p
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Answer:
The business should order the inventory 25 times per year in a lot of 100 to minimize the inventory costs.
Explanation:
To calculate the lot size that minimizes the inventory cost, we will calculate the economic order quantity (EOQ) which is the order quantity that a business should order in each order to minimize the inventory related costs. The EOQ can be calculated using the attached formula,
EOQ = √[(2 * 2500 * 20) / 10]
EOQ = 100 packages
The lot size for each order should be 100 to minimize the inventory costs.
We can calculate the number of reorders per year by dividing the total annual demand by the EOQ.
Number of orders = 2500 / 100
Number of orders = 25 times
