Question

A company that embroiders t-shirts, uses 15,000 plain t-shirts annually. the optimal order quantity is 500 shirts. the company embroiders approximately 150 shirts daily. using the ____ calculations, the company knows it should place an order approximately every 3 days.

Answer 1

Economic Order Quantity

Step-by-step explanation:

The Economic Order Quantity (EOQ) is the amount of material that should be ordered that will minimize holding costs and ordering costs.

Placing an order takes time, and processing/storing the items when they arrive takes time and money. If you order a lot all at once, you will have to store the materials somewhere until you need them which can be expensive. On the other hand, if you order too little you will have to go through the hassle of ordering again soon. The EOQ is the ideal quantity that will provide the most material while minimizing costs.