Question

Demand for an item is 1,700 units per year. Each order placed costs $8; the annual cost to carry items in inventory is $3 each. In what quantities should the item be ordered

Answer 1

95.22 units

Step-by-step explanation:

The computation of the number of quantities for ordering the items is shown below:

For this question, we need to find out the economic order quantity which is

`= \sqrt{\frac{2* \text{Annual demand}* \text{Ordering cost}}{\text{Carrying cost}}}`

where,

Annual demand is 1,700 units per year

Ordering cost per order is $8

Carrying cost per unit is $3

Now placing these values to the above formula

So, the economic order quantity is

`= \sqrt{\frac{2* \text{1,700}* \text{\$8}}{\text{\$3}}}`

= 95.22 units

We simply applied the above formula to find out the number of quantities for order