Question

Bus Econ 12.6.39 A publishing company sells 450 comma 000 copies of certain books each year. It costs the company $ 1 to store each book for a year. Each time it must print additional​ copies, it costs the company $ 1 comma 000 to set up the presses. How many books should the company produce during each printing in order to minimize its total storage and setup​ costs?

Answer 1

30,000 books

Step-by-step explanation:

In this question, we have to find out the economic order quantity which is presented below:

The computation of the economic order quantity is shown below:

=
`\sqrt{\frac{2* \text{Annual demand}* \text{Ordering cost}}{\text{Carrying cost}}}`

=
`\sqrt{\frac{2* \text{450,000}* \text{\$1,000}}{\text{\$1}}}`

= 30,000 books

This 30,000 books would minimize its total storage and setup​ costs. It shows a relationship between the annual demand, ordering cost per order and carrying cost or holding cost.