Question

a business sells $7,500 units or product per year, the ordering costs are $75 per order, and the carrying cost are $0.75 per unit per year, what would be the number of units the business should order each time they order using the economic order quantity model?

Answer 1

The business should order approximately 447 units each time they order using the economic order quantity model.

Step-by-step explanation:

1. The economic order quantity (EOQ) is calculated using the formula: EOQ = sqrt((2 x Ordering Cost x Demand) / Carrying Cost).
2. From the given information, the ordering cost is $75 per order and the carrying cost is $0.75 per unit per year. The demand is 7,500 units per year.
3. Plugging these values into the formula, the EOQ = sqrt((2 x 75 x 7,500) / 0.75) = sqrt(150,000 / 0.75) = sqrt(200,000) = 447.21.
4. Therefore, the business should order approximately 447 units each time they order using the economic order quantity model.