Question

SNK Incorporated, a company that makes widgets, would like to reduce its inventory cost by determining the optimal number of widgets to obtain per order. The annual demand is 1,000 units; the setup or ordering cost is $10 per order; and the holding cost per unit per year is $.50. What is the optimal number of units per order

Answer 1

The optimal number of units per order is 200 units

Step-by-step explanation:

The computation of the optimal number of units per order is shown below:

Here we apply the economic order quantity formula

`EOQ = \sqrt{(2DS)/(H)\\\\= \sqrt{(2*1,000*10)/(0.50) }\\\\ = \sqrt{(20,000)/(0.50) }\\\\ = √(40,000)`

= 200 units

hence, the optimal number of units per order is 200 units and the same is to be considered