Diagnostic supplies have expected sales of 84,100 units per year, carrying costs of $5 per unit, and an ordering cost of $10 per order. a. what is the What ordering quantity?
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To calculate the optimal ordering quantity, we can use the Economic Order Quantity (EOQ) formula, which helps determine the most cost-effective quantity to order. The EOQ formula is given by:
EOQ = √(2DS / H)
Where: D = Demand in units (annual sales) , S = Ordering cost per order, H = Holding (or carrying) cost per unit per year
Using the given values:
D = 84,100 units/year (expected sales) , S = $10/order (ordering cost), H = $5/unit/year (carrying cost)
Plugging these values into the EOQ formula, we get:
EOQ = √(2 * 84,100 * 10 / 5)
EOQ = √(1,682,000 / 5)
EOQ = √336,400 EOQ
580 units per order.
Therefore, the economic ordering quantity is approximately 580 units per order.