Question

Nowlin Pipe & Steel has projected sales of 76,800 pipes this year, an ordering cost of $4 per order, and carrying costs of $1.50 per pipe. a. What is the economic ordering quantity?

Answer 1

Calculating the Economic Order Quantity (EOQ) using the given figures for projected sales, ordering cost, and carrying costs, the EOQ for Nowlin Pipe & Steel is 640 pipes per order.

Step-by-step explanation:

The student has to calculate the Economic Order Quantity (EOQ) for Nowlin Pipe & Steel based on the given data of projected sales, ordering cost, and carrying costs.

EOQ is a formula used by companies to determine the optimal order quantity that minimizes logistics costs. The formula for EOQ is:

EOQ = √((2 * DS) / H)

where:

• D is the demand in units (usually for a year),
• S is the order cost (per order), and
• H is the holding or carrying cost (per unit, per year).

For Nowlin Pipe & Steel:

• D = 76,800 pipes
• S = $4 per order
• H = $1.50 per pipe

Plugging these values into the EOQ formula gives:

EOQ = √((2 * 76,800 * 4) / 1.50)

EOQ = √(614,400 / 1.50)

EOQ = √(409,600)

EOQ = 640

Therefore, the economic ordering quantity for Nowlin Pipe & Steel would be 640 pipes per order.