Question

rusty pipe, a local retailer of plumbing supplies, faces demand for one of its skus at a constant rate of 12,950 units per year. it costs rusty pipe $15 to process an order to replenish stock and $2 per unit per year to carry the item in stock. stock is received 2 working days after an order is placed. no backorder is allowed. assume 350 working days a year. what is the optimal order quantity? (enter your response rounded to the nearest whole number.)

Answer 1

The optimal order quantity (Economic Order Quantity) that Rusty Pipe should order each time is 441 units.

What is the Economic Order Quantity (EOQ)?

The economic order quantity (EOQ) is the optimal cost-effective quantity that a company can order to reduce its annual inventory costs.

The EOQ is the ideal order size that will satisfy the annual demand without insufficient or excessive inventory.

The EOQ formula is the square root of (2 x annual demand x ordering cost) /holding cost.

Annual demand = 12,950 units

Ordering cost = $15 per order

Holding or carrying cost per unit = $2

EOQ = square root of (2 x 12,950 x 15)/$2

= square root of 194,250

= 441 units

Thus, Rusty Pipe can optimally order 441 units each time it places an order.

Learn more about the Economic Order Quantity at https://brainly.com/question/13386271 and https://brainly.com/question/26814787

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