Question

Diagnostic supplies has expected sales of 84,100 units per year, carrying costs of $5 per unit, and an ordering cost of $10 per order.

a. what is the economic ordering quantity?

Answer 1

The economic order quantity (EOQ) for Diagnostic supplies is calculated using the formula √((2DS)/H) with annual sales as demand (D), ordering cost (S), and carrying cost per unit (H). By plugging in the values given, the EOQ is found to be approximately 580 units.

Step-by-step explanation:

To calculate the economic order quantity (EOQ) for Diagnostic supplies, we utilize the EOQ formula:

EOQ = √((2DS)/H)

Where:

• D = Demand in units (annual sales)
  
• S = Ordering cost per order
  
• H = Carrying cost per unit per year
  

Plugging in the values provided:

• D = 84,100 units
  
• S = $10
  
• H = $5
  

EOQ = √((2 * 84,100 * 10) / 5)

EOQ = √((1,682,000) / 5)

EOQ = √(336,400)

EOQ = √(1.67 * 10^5)

EOQ = 580 units (approximately)

Therefore, the economic ordering quantity for Diagnostic supplies is about 580 units per order to minimize the total inventory costs.

Answer 2

Using the equation for Economic order quantity

(EOQ) = √( 2 S O / C)

where S = 84,100, O = $10 per order, C = $5 per unit. Substituting the given values to the equation, we get :

EOQ =√(2 * 84,100194,400 * 10 / 5) = 580

Therefore, the economic ordering quantity is 580 units