Question

The GoT cups are a fast seller and you need to ensure that you have enough rolls of paper to fulfill demand. The first stage in the process is to determine the total cost of the current inventory ordering model. Given the following information, how many rolls should they order to minimize costs?H: $1.75 per unitD: 500 rolls per monthQ: 100 units ordered at a timeS: $25 per order

Answer 1

Answer:

119 units

Explanation:

The economic order quantity is the minimum amount of inventory that a seller must keep to demand and lower the holding cost. The ordering cost is $25 per order. Holding cost is $1.75 per unit. The total demand is 500 units per month. The economic order quantity that will minimize the cost of the GoT cups is

EOQ = $\sqrt{\frac{2*Demand*ordering cost}{Holding cost} }$

EOQ is 119 units.

Answer 2

Answer:

EOQ = 414 rolls

Explanation:

In order to calculate the number of orders to minimize the cost, we should calculate that by using the Economic order quantity model.

DATA

Holding cost = $1.75/unit

Annual demand = 500 rolls x 12 = 6000 rolls

Ordering cost = $25

Formula

EOQ =$\sqrt{\frac{2Cod}{Ch} }$

Where

Co = ordering cost

D = Annual demand

Ch = Holding cost

Solution

EOQ = $\sqrt{\frac{2(6000)(25)}{1.75} }$

EOQ = $\sqrt{\frac{300000}{1.75} }$

EOQ = 414 rolls

They should order 414 rolls to minimize the cost.