Question

A motorcycle shop sells 300 motorcycles per year. Each motorcycle costs the shop 11000 dollars. There is a fixed delivery charge of 1500 dollars for each lot of motorcycles ordered from the distributor. It costs 1000 dollars per year to store a motorcycle. How many motorcycles should be ordered in each lot in order to minimize inventory cost (storage plus reorder)? Round your answer to the nearest integer.

Answer 1

30 motercycles should be order in each lot to minimum inventory cost

Step-by-step explanation:

given data

motorcycle sells = 300

motorcycle costs= $11000

fixed delivery charge = $1500

store a motorcycle cost = $1000

to find out

How many motorcycles should be ordered

solution

we will apply here formula for economic order quantity for minimum cost is

economic order quantity =
`\sqrt{(2DC)/(S)}` ..............1

here D is motorcycle sells i.e 300 and C is delivery charge and S is storage cost

so put here all these value we get

economic order quantity =
`\sqrt{(2*300*1500)/(1000)}`

economic order quantity = 30

so 30 motercycles should be order in each lot to minimum inventory cost