Question

Ollah's Organic Pet Shop sells about 8,500 bags of free-range dog biscuits every year. The fixed ordering cost is $10, and the cost of holding a bag in inventory for a year is $0.50. Click the icon to view the table of z values.

What is the economic order quantity for the biscuits? The EOQ is 583. (Enter your response rounded to the nearest whole number.)

Answer 1

The economic order quantity (EOQ) for Olla's Organic Pet Shop is calculated using the EOQ formula and given demand, ordering cost, and holding cost, resulting in an EOQ of approximately 583 bags.

Step-by-step explanation:

The question is asking for the calculation of the Economic Order Quantity (EOQ) for Olla's Organic Pet Shop for their sales of free-range dog biscuits. The EOQ model minimizes the total cost of ordering and holding inventory. The formula to calculate EOQ is given by

EOQ = √((2DS)/H)

where:

• D is the annual demand,
• S is the ordering cost per order, and
• H is the holding cost per unit per year.

Given:

• D = 8,500 bags per year,
• S = $10
• H = $0.50

EOQ calculation:

EOQ = √((2 * 8,500 * 10) / 0.50)

EOQ = √(170,000 / 0.50)

EOQ = √340,000

EOQ ≈ 583 bags (rounded to the nearest whole number)

The economic order quantity for the biscuits is approximately 583 bags. This represents the ideal order size to minimize the sum of ordering and holding costs for the shop's inventory of dog biscuits.