Question

Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation.​ Thomas's fastest-moving inventory item has a demand of 5 comma 750 units per year. The cost of each unit is ​$96 ​, and the inventory carrying cost is ​$9 per unit per year. The average ordering cost is ​$31 per order. It takes about 5 days for an order to​ arrive, and the demand for 1 week is 115 units.​ (This is a corporate​ operation, and there are 250 working days per​ year). ​a) What is the​ EOQ? nothing units ​(round your response to two decimal​ places).

Answer 1

Answer:

199.02 units

Explanation:

The computation of the economic order quantity is shown below:

Data provided in the question

Annual demand per year = 5,750 units

The Cost of each units = $96

The inventory carrying cost per unit per year = $9

The average ordering cost per order = $31

So, economic order quantity is

$= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}$

$= \sqrt{\frac{2\times \text{5,750}\times \text{\ 31}}{\text{\ 9}}}$

= 199.02 units

Hence, the economic order quantity is 199.02 units