Question

Roller Raider Wheels, in Lubbock, Texas, sells bicycles and would like to reduce its inventory cost by determining the optimal number of bicycles to obtain per order. The annual demand is 2,000 units and the ordering cost is $50 per order. The carrying cost per unit is $3.20. Using these figures, calculate the expected number of orders per year.

Answer 1

8 orders per year

Step-by-step explanation:

Annual demand, D = 2,000 units

Ordering cost, O = $50 per order

Holding cost, H = $3.20

`Economic\ order\ quantity(Q)=\sqrt{(2* D* O)/(H) }`

`Economic\ order\ quantity(Q)=\sqrt{(2* 2,000* 50)/(3.2) }`

= 250 units

Hence,

No. of orders per year
`=(D)/(Q)`

`=(2,000)/(250)`

= 8 orders per year