Answer:
Optimal order quantity= 217.781 units
Explanation:
Optimal order quantity is also called economic order quantity is the most cost-effective level of a product that can be manufactured at a certain time. Calculating optimal order quantity is important as it minimises excess stock of products and associated costs of storing excess.
Optimal order quantity= √{2*(Annual usage per unit* Setup cost)/(Annual carrying cost per unit)
Annual usage per unit= 12,000/6= $2,000
Optimal order quantity= √2*(2,000*9.96)/0.84
Optimal order quantity= √47,428.57
Optimal order quantity= 217.781 units
