Question

Local UnderArmour store would like to know how many units of their high selling product should be ordered in the store. Historical sales data shows that the annual demand is 300,000 units. The store is open 300 days a year, and the lead time from placing an order to receiving the products is 10 days. The average daily demand is 1000 units. The store wants to maintain a safety stock of 500 units. What is the Economic Order Quantity (EOQ) for this product?

a. 1000 units
b. 2000 units
c. 5000 units
d. 10,000 units

Answer 1

The Economic Order Quantity (EOQ) for this product is 77 units.

Step-by-step explanation:

The Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity for a product in order to minimize costs.

To calculate the EOQ, we need to consider the annual demand, the number of business days per year, the lead time, the average daily demand, and the safety stock. In this case, the annual demand is 300,000 units, the store is open 300 days a year, the lead time is 10 days, the average daily demand is 1000 units, and the safety stock is 500 units.

The formula for EOQ is: √((2 × Annual demand × Lead time) / Average daily demand)

Substituting the given values, the calculation would be: √((2 × 300,000 × 10) / 1000) = √(6,000,000 / 1000) = 77.46

Rounding the answer to the nearest whole number, the Economic Order Quantity (EOQ) for this product would be 77 units.