Question

Wood County Hospital consumes 500 boxes of bandages per week. The price of bandages is $70 per box. The hospital operates 52 weeks per year. The cost of processing an order is $60, and the cost of holding one box for a year is 15% of the value of the box. What is the Economic Order Quantity

Answer 1

545 boxes

Step-by-step explanation:

Data provided in the question:

Number of boxes consumed per week = 500

Price of bandage per box = $70

Total operating weeks = 52

cost of processing an order, S = $60

cost of holding one box for a year, H = 15% of value of box

= 0.15 × $70

= $10.5

Now,

Annual demand, D = 52 × 500 = 26000 boxes

Economic order quantity =
`\sqrt{(2DS)/(H)}`

on substituting the respective values, we get

Economic order quantity =
`\sqrt{(2*26000*\$60)/(\$10.5)}`

= 545.10 ≈ 545 boxes