Question

Assume uniform annual demand for an item is 50,000 units, order costs are $10.00, and the annual cost of holding one unit in inventory is 5% of the $20.00 acquisition cost. The optimal order quantity is

A. 100.00 units.

B. 224.00 units.

C. 1,000 units.

D. 448.00 units

Answer 1

Optimal order quantity will be 1000 units

So option (c) will be correct answer

Step-by-step explanation:

We have given annual demand for an item D = 5000 units

Order cost S = $10

Annual cost of holding H = 5 % of $20 which is equal to $1

So holding cost H = 1

We have to find the optimal order quantity

Optimal order quantity is given by

Optimal order quantity
`=\sqrt{(2DS)/(H)}=\sqrt{(2* 50000* 10)/(1)}=1000units`

So option (C) will be correct option