Question

A local retailer expects to sell approximately 3,000 of the most popular model of flat-screen TVs next year. The annual carrying cost of each TV is $23, and the ordering cost is $40 each. The business is open 24x7x365 days per year. Answer the following:

What is the economic order quantity (EOQ)?

Answer 1

The economic order quantity (EOQ) is approximately 158 TVs.

Step-by-step explanation:

The economic order quantity (EOQ) is used to determine the optimal quantity of inventory to order to minimize the total cost of ordering and carrying inventory. The formula to calculate EOQ is:

EOQ = sqrt((2 * ordering cost * annual demand) / carrying cost per unit)

In this case, the ordering cost is $40, the annual demand is 3,000 TVs, and the carrying cost per unit is $23. Plugging these values into the formula, we get:

EOQ = sqrt((2 * 40 * 3000) / 23) = 158.49

Therefore, the economic order quantity is approximately 158 TVs.