Question

Brutus has a banana stand on high street. His stand has daily demand of 50 bananas and he operates his stand 300 days per year. The holding cost of each banana is $1 and his lead time is 4 days. Additionally ordering cost is $5. Calculate at how many bananas left Brutus should reorder

Answer 1

To calculate the amount of bananas left when Brutus should reorder, we can use the economic order quantity (EOQ) formula. With an annual demand of 15,000 bananas, an ordering cost of $5, and a holding cost of $1 per unit per year, Brutus should reorder when there are approximately 387 bananas left.

Step-by-step explanation:

To calculate at how many bananas left Brutus should reorder, we need to consider the economic order quantity (EOQ) formula.

The EOQ formula is:

EOQ = sqrt((2 * D * S) / H)

Where:

• EOQ = Economic Order Quantity
• D = Annual demand (in units) = 50 bananas/day * 300 days/year = 15,000 bananas
• S = Ordering cost per order = $5
• H = Holding cost per unit per year = $1

Using the values provided, we can plug them into the formula:

EOQ = sqrt((2 * 15,000 * 5) / 1)

Simplifying further:

EOQ = sqrt(150,000)

EOQ ≈ 387 bananas

Therefore, Brutus should reorder when there are approximately 387 bananas left.