Question

the summer outdoor furniture company produces wooden lawn chairs. the annual demand from its store customers is 17,400 chairs per year. the transport and handling costs are $2,600 each time a shipment of chairs is delivered to stores from its warehouse. the annual carrying cost is $3.75 per chair. what is the optimal order quantity? round answer to the nearest whole number and don't include any words in your answer.

Answer 1

Using the Economic Order Quantity formula, the optimal order quantity for the Summer Outdoor Furniture Company is approximately 3,467 chairs when rounded to the nearest whole number.

Step-by-step explanation:

To calculate the optimal order quantity for the Summer Outdoor Furniture Company, we utilize the Economic Order Quantity (EOQ) formula, which is:
EOQ = √((2* Demand * Order cost) / Carrying cost)

Given that:

• The annual demand is 17,400 chairs
• The transport and handling costs are $2,600 per shipment
• The annual carrying cost is $3.75 per chair

Plugging these values into the formula:

EOQ = √((2 * 17,400 * $2,600) / $3.75)

= √((45,080,000) / $3.75)

= √(12,021,333.33...)
Approximately, EOQ = 3,467 chairs
Therefore, the optimal order quantity for the company is approximately 3,467 chairs when rounded to the nearest whole number.