Question

Jake Fleming sells graphic card update kits for computers. Jake purchases these kits for $20 and sells about 250 kits a year. Each time Jake places an order, it costs him $25 to cover shipping and paperwork. Jake figures that the cost of holding an update kit in inventory is about $3.50 per kit per year. What is the economic order quantity

Answer 1

60 Kits

Step-by-step explanation:

Cost price (C) = $20/Kit

Yearly se (D) = 250 kit/year

Shipping cost / Ordering cost (Co) = $25

Holding cost (Ch) = $3.5/Kit-year

Economic order quantity = √2.D.Co / Ch

Economic order quantity = √2*250*25/3.5

Economic order quantity = √12500/3.5

Economic order quantity = √3571.4285

Economic order quantity = 59.7614305

Economic order quantity = 60 Kits