Question

Matthew​ Liotine's Dream Store sells water beds and assorted supplies. His​ best-selling bed has an annual demand of 410 units. Ordering cost is ​$41​; holding cost is ​$5 per unit per year.

To minimize the total cost, how many units should be ordered each time an order is placed?

Answer 1

Given:

Annual demand = 410 units

Ordering cost = $41

Holding cost = $5 unit per year

To find:

Number of units to be ordered each time an order is placed

Solution:

On calculating the number of units,

$\Rightarrow \sqrt{(\frac{2(390)(38)}{5})} \rightarrow\sqrt{\frac{780\times38}{5}}= 76.99$

Therefore, to minimize the total cost, approximately 77 units should be ordered each time an order is placed.