Question

Basic EOQ Analysis Consider a medical practice that performs dermatological surgeries. The practice uses 15,000 scrub kits per year and wants to decide how many to order at a time and when to place orders. The cost of placing an order is $30 per order and the annual carrying cost for a single scrub kit is $2.50. They operate 300 days per year and the lead time to receive an order is 4 days. a) Create a new worksheet named

Answer 1

To determine the economic order quantity (EOQ) for scrub kits, use the formula: EOQ = √((2 * annual demand * cost per order) / annual carrying cost). The medical practice should order approximately 949 scrub kits at a time.

Step-by-step explanation:

In this case, the medical practice wants to determine the economic order quantity (EOQ) for scrub kits. The EOQ is the optimal order quantity that minimizes the total cost of ordering and carrying inventory. To calculate the EOQ, we can use the following formula:

EOQ = √((2 * annual demand * cost per order) / annual carrying cost)

Plugging in the given values, the EOQ can be calculated as follows:

• Annual demand = 15,000 scrub kits
• Cost per order = $30 per order
• Annual carrying cost = $2.50 per scrub kit

EOQ = √((2 * 15,000 * 30) / 2.50) = √(900,000) ≈ 948.68

Therefore, the medical practice should order approximately 949 scrub kits at a time.