Question

a distributor expects to sell about 11,460 widgets next yearannual carrying cost is $12 per widget. order costs are $85. they operate 288 days a yearwhat is the eoq?

Answer 1

The student asked for the calculation of the Economic Order Quantity (EOQ) for a distributor planning to sell 11,460 widgets next year, with a carrying cost of $12 per widget, and order costs of $85. Using the EOQ formula, we find that the optimal order quantity for minimizing costs is approximately 403 widgets.

Step-by-step explanation:

The student is seeking to find the Economic Order Quantity (EOQ) for a distributor that anticipates selling around 11,460 widgets in the following year. The EOQ formula is used to determine the ideal order quantity that a company should purchase to minimize its inventory costs such as holding costs, shortage costs, and order costs. The formula for EOQ is given by:

EOQ = √((2 * Demand * Order Cost) / Holding Cost)

In this scenario, we're given the following information:

• Annual demand (D) = 11,460 widgets
• Annual carrying (holding) cost per unit (H) = $12
• Order Cost (S) = $85

Substituting these values into the EOQ formula gives us:

EOQ = √((2 * 11,460 * $85) / $12)

EOQ = √((1,951,000) / $12)

EOQ = √162,583.33

EOQ ≈ 403 units

Therefore, the EOQ, or optimal order quantity for the distributor, is approximately 403 widgets.