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a company sells 600 bottles of a dietary supplement per week at$ 100 per bottle. The supplement is ordered from a supplier who charges fixed cost of $30 per order, and $ 50 per bottle. The annual inventory holding cost is 40%. Assume the company operates 50 weeks in a year. What is the optimal number of bottles company should order?

Respuesta :

jepessoa

Answer:

the economic order quantity or optimal quantity = 300 bottles per order

Explanation:

economic order quantity (EOQ) = √[(2SD) / H]

  • S = cost per order = $30
  • D = annual demand = 600 x 50 weeks = 30,000
  • H = holding costs = $50 x 40% = $20

EOQ = √[(2 x $30 x 30,000) / $20] = √($1,800,000 / $20) = √90,000 = 300

This means that the company must make 2 orders per week and 100 orders per year. This happens because the holding costs per unit are too high, therefore, in order to reduce costs you must have a small inventory.

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