Question

Rick Jerz is attempting to perform an inventory analysis on one of his most popular products Annual demand for this product is 5,000 units carrying cost is $60 per unit per year, order costs for his company typically run nearly $30 per order, and lead time averages 11 days. (Assume 250 working days per year.)

The economic order quantity is ____ units (round your response to the nearest whole number)

Answer 1

The economic order quantity (EOQ) for Rick Jerz's popular product, given the parameters of annual demand, per unit carrying cost, and order cost, is approximately 71 units when rounded to the nearest whole number.

Step-by-step explanation:

Rick Jerz is attempting to perform an inventory analysis to calculate the Economic Order Quantity (EOQ) for one of his products. The annual demand for the product is 5,000 units, the carrying cost is $60 per unit per year, and the order costs are $30 per order. Given that the average lead time is 11 days and there are 250 working days in a year, we can use the EOQ formula: EOQ = √((2 * Demand * Order Cost)/Carrying Cost). Plugging in the given numbers: EOQ = √((2 * 5000 * 30)/60) = √(5000) ≈ 70.71. The economic order quantity is therefore approximately 71 units, once rounded to the nearest whole number.