Question

Nowlin Pipe & Steel has projected sales of 9,800 pipes this year, an ordering cost of $6 per order, and carrying costs of $1.50 per pipe.

Answer 1

Answer: See explanation

Explanation:

Here is the complete question:

Nowlin Pipe & Steel has projected sales of 9,800 pipes this year, an ordering cost of $6 per order, and carrying costs of $1.50 per pipe.

a. What is the economic ordering quantity?

b. How many orders will be placed during the year?

c. What will the average inventory be?

a. Annual Demand = 9800 pipes

Cost per order = $6

Carrying cost per unit = $1.5

EOQ = ✓[(2 x Annual demand x cost per order)/carrying cost per order]

= ✓2 × 9800 × 6/1.5

= ✓78400

= 280 units

b. Number of orders orders placed would be:

= 9800/280

= 25 orders

c. Average inventory would be calculated as:

= 280/2

= 140 units